As filed with the Securities and Exchange Commission on April 6, 1998
Registration No. 333- _____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FOCUS ENHANCEMENTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-11860 04-3186320
(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification Number)
142 North Road
Sudbury, Massachusetts 01776
(781) 371-2000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Christopher P. Ricci
Senior Vice President and General Counsel
FOCUS Enhancements, Inc.
142 North Road
Sudbury, Massachusetts 01776
(781) 371-2000
(Name, address, including zip code, telephone number,
including area code, of agent for service)
Copy to:
John A. Piccione, Esq.
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
(617) 338-2800
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Approximate date of commencement of proposed sale to the public: From
time to time or at one time after the effective date of the Registration
Statement as determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| _____________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| _____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<PAGE>
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Amount of
Title of Each Class of Securities to Amount to Maximum Registration
be Registered be Registered Price to Public Offering Price Fee(2)
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 1,441,224 $3.15625 $4,548,863.20 $1,341.91
share(1)
<FN>
(1) The Common Stock being registered consists of: (i) 1,092,150 shares issued to JNC Opportunity Fund Ltd. (the "Investor") in
connection with a private placement in March 1998 (the "March 98 Offering"); (ii) 327,645 shares issuable to the Investor upon
the exercise of a warrant issued to the Investor; and (iii) 21,429 shares issuable upon the exercise of warrants issued to the
placement agent and its designee in connection with the March 98 Offering, all as described in the "SELLING STOCKHOLDERS" and
"PLAN OF DISTRIBUTION" sections of the Prospectus.
(2) The registration fee is calculated pursuant to Rule 457(c) of the Securities Act of 1933 by taking the average of the bid and
asked prices of the registrant's Common Stock, $.01 par value per share, on March 31, 1998 as reported on the NASDAQ SmallCap
Market.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(ii)
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion
Preliminary Prospectus Dated April 6, 1998
REOFFER
PROSPECTUS
FOCUS ENHANCEMENTS, INC.
1,441,224 Shares of Common Stock
This Prospectus relates to the offer and sale from time to time of up to
1,441,224 shares (the "Shares") of common stock, $.01 par value per share (the
Common Stock") of FOCUS Enhancements, Inc. (the "Company"), by the Selling
Stockholders named herein (the "Selling Stockholders"), or by their respective
pledgees, donnees, transferees or other successors in interest that receive such
Shares as a gift, partnership distribution or other non-sale related transfer.
Of the 1,441,224 Shares being offered hereby: (i) 1,092,150 Shares were issued
to JNC Opportunity Fund Ltd. (the "Investor"); (ii) 327,645 Shares are issuable
upon the exercise of warrants (the "Investor Warrants") issued to the Investor;
and (iii) 21,429 Shares are issuable upon the exercise of warrants issued to the
placement agent and its designee (the "Broker Warrants" and, together with the
Investor Warrants, the "Warrants"). The Shares and Warrants were issued by the
Company to the Selling Stockholders on March 3, 1998 in a private placement (the
"March 98 Offering"). To the extent that the Warrants are exercised, the Company
will receive proceeds equal to the exercise price of the Warrants. The Company
will not receive any proceeds from the sale of the Shares by the Selling
Stockholders. The expenses of registration of the Shares which may be offered
hereby under the Securities Act of 1933, as amended (the "Securities Act") will
be paid by the Company.
The Shares covered under the Registration Statement of which this
Prospectus is a part may be offered for sale from time to time by or for the
account of the Selling Stockholders, or their pledgees, donees, transferees or
other successors in interest, in the open market, on the NASDAQ Small Cap Market
or on one or more exchanges on which the Shares are then listed, in privately
negotiated transactions, in an underwritten offering, in a combination of such
methods, or by any other legally available means, at market prices prevailing at
the time of such sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices. The Shares are intended to be sold through
one or more broker-dealers or directly to purchasers. Such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders, their successors in interest and/or the purchasers of
the Shares for whom such broker-dealers may act as agent or to whom they may
sell as principal, or both (which compensation as to a particular broker-dealer
may be in excess of customary commissions). The Selling Stockholders, their
successors in interest and/or any broker-dealers acting in connection with the
sale of the Shares hereunder may be deemed to be underwriters with the meaning
of Section 2(11) of the Securities Act, and any commissions or other
compensation received by them and any profits realized by them on the resale of
the Shares as principals may be deemed underwriting compensation under the
Securities Act. See "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION."
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol FCSE. On March 31, 1998, the last sale price of the Company's Common
Stock as reported on the Nasdaq SmallCap Market was $3 1/8.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY
INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGES 5 THROUGH 7.
----------------------
The date of this Prospectus is April __, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or solicitation of an offer to
buy securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create an implication that there
has been no change in the affairs of the Company since the date hereof or the
information contained or incorporated by reference herein is correct at any time
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copies obtained at the public reference facilities maintained by
the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the Commission:
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661- 2511; and New York Regional Office, Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
materials may also be accessed electronically by means of the Commission's home
page at http://www.sec.gov.
The Company has filed with the Commission a Form S-3 Registration
Statement (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This prospectus, which constitutes part of the Registration
Statement filed by the Company with the Commission under the Securities Act
omits certain information contained in the Registration Statement in accordance
with the rules and regulations of the Commission. Reference is hereby made to
the Registration Statement and the exhibits relating thereto for further
information with respect to the Company and the securities offered hereby. Any
statements contained herein concerning provisions of any documents are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are hereby incorporated in this Prospectus and specifically
made a part hereof by reference: (i) the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997; (ii) the definitive Proxy Statement filed
with the Commission dated June 20, 1997 provided to stockholders in connection
with the Annual Meeting of Stockholders held on July 25, 1997; and (iii) the
description of the Company's Common Stock contained in the Registration
Statement on Form SB-2 File No. 33-60248-B filed with the Commission on March
29, 1993, as amended. All documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to
-2-
<PAGE>
the termination of the offering of the securities offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the respective dates of filing of such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in the applicable Prospectus Supplement), or in any
subsequently filed document that also is or is deemed to be incorporated herein
by reference, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the information that has been incorporated by
reference in this Prospectus (excluding exhibits unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be made to the Company at its
principal executive offices, 142 North Road, Sudbury, Massachusetts 01776,
Attention: Christopher P. Ricci, telephone (781) 371-2000.
-3-
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
THE COMPANY....................... FOCUS Enhancements, Inc. (the "Company"
or "FOCUS") internally develops, markets
and sells worldwide a proprietary line
of PC-to-TV video conversion products
for PC's and Macintoshes (R). The
Company's proprietary PC-to-TV video
conversion products include video output
devices marketed and sold under the
Company's registered "TView" trademark.
All of the Company's PC-to-TV conversion
products enable users to transmit at
low-cost, high quality, computer
generated images from any DOS, Windows
or Mac OS based personal computer to any
television of any size with a standard
RCA or S-Video interface. FOCUS'
PC-to-TV technology provides sharp,
flicker-free, computer-generated images
on televisions for multimedia/business
presentations, classroom/training
sessions, game playing, collective
viewing of computer applications and
Internet browsing. The Company markets
and sells its FOCUS branded consumer
products globally through a network of
distributors, volume resellers, mail
order, value added resellers ("VARs")
and original equipment manufacturers
("OEMs").
RISK FACTORS...................... The Offering involves substantial risk.
See "RISK FACTORS".
SECURITIES OFFERED................ 1,441,224 Shares. The Common Stock
offered hereby consists of: (i)
1,092,150 Shares issued to the Investor;
(ii) 327,645 Shares issuable to the
Investor upon the exercise of the
Investor Warrants; and (iii) 21,429
Shares issuable upon exercise of the
Broker Warrants. See "SELLING
STOCKHOLDERS."
OFFERING PRICE.................... All or part of the Shares offered hereby
may be sold from time to time in amounts
and on terms to be determined by the
Selling Stockholders at the time of
sale.
USE OF PROCEEDS................... To the extent that the Warrants are
exercised, the Company intends to use
the net proceeds for general working
capital purposes. The Company will
receive no part of the proceeds from the
sale of the Shares registered pursuant
to this Registration Statement.
NASDAQ TRADING SYMBOL............. FCSE
-4-
<PAGE>
RISK FACTORS
An investment in the securities offered hereby involves a high degree
of risk and should only be purchased by investors who can afford to lose their
entire investment. The following factors, in addition to those discussed
elsewhere in the Prospectus, should be considered carefully in evaluating the
Company and its business.
Future Capital Needs. At December 31, 1997, the Company had working
capital of $2,619,300, cash and cash equivalents of $719,851 and was fully drawn
on its line of credit (approximately $720,000 at December 31, 1997) with its
bank and its $1.5 million term note with an unaffiliated lender. Historically,
the Company has been required to meet its short- and long-term cash needs
through debt and the sale of Common Stock in private placements in that cash
flow from operations has been insufficient. During 1997, the Company received
approximately $6,082,000 in net proceeds from the exercise of warrants, stock
options and the sale of Common Stock. In March 1998, the Company received
approximately $2,800,000 in net proceeds from the sale of Common Stock in the
March 98 Offering.
The Company's future capital requirements will depend on many factors,
including cash flow from operations, continued progress in its research and
development programs, competing technological and market developments, and the
Company's ability to market its products successfully. During 1998, the Company
may be required to raise additional funds through equity or debt financing, of
which there can be no assurance. Any equity financing could result in dilution
to the Company's then-existing stockholders. Sources of debt financing may
result in higher interest expense. Any financing, if available, may be on terms
unfavorable to the Company. If adequate funds are not available, the Company may
be required to curtail its activities significantly.
Reliance on Major Customers. For the year ended December 31, 1997,
approximately 16% of the Company's revenues were derived from sales to a major
distributor, approximately 27% of the Company's revenues were derived from sales
to a major manufacturer of personal computers and its contract manufacturer, and
approximately 11% of the Company's revenues were derived from sales to a major
television manufacturer. Management expects that sales to these customers will
continue to represent a significant percentage of the Company's future revenues.
The Company does not have long-term contracts pursuant to which any customer is
required to purchase any minimum amount of products. There can be no assurance
that the Company will continue to receive orders of the same magnitude as in the
past from existing customers or that it will be able to market its current or
proposed products to new customers. The loss of any major customer by the
Company would have a materially adverse effect on the business of the Company as
a whole.
History of Operating Losses. The Company has experienced limited
profitability since its inception and at December 31, 1997, had an accumulated
deficit of $22,411,611. The Company incurred net losses of $10,772,410 and
$1,986,079 for the years ended December 31, 1996 and 1997, respectively.
There can be no assurance that the Company will be profitable in 1998.
Limited Availability of Capital under Credit Arrangements with Lenders.
The Company maintains a line of credit with Silicon Valley Bank which is fully
drawn ($720,000 was owed to the bank at December 31, 1997). At December 31,
1997, the Company was in violation of certain debt covenants relating to the
line of credit. In addition, the line of credit was scheduled to expire on March
8, 1998. The Company has received a waiver of the covenants from the bank, a
revision of the loan covenants and an agreement to extend the line until June 8,
1998. The Company is currently in discussions with another lender to refinance
this line.
-5-
<PAGE>
The Company also owes $1.5 million to an unaffiliated lender pursuant
to a term note that currently accrues interest at a revolving rate of prime plus
4%, is payable quarterly in arrears at the end of December, March, June, and
September, and was due February 1, 1996. On June 28, 1996, the Company
negotiated an amendment to the term note with the lender to extend the due date
of the term note to March 31, 1997. Pursuant to the amendment, the Company
granted the lender a second security interest in all the assets of the Company.
The Company is currently negotiating an additional extension with the lender.
In the event that the Company is unsuccessful in refinancing its bank
line of credit or that the unaffiliated lender does not extend the due date of
its term note, the Company would be required to repay the amounts outstanding
from working capital or from equity or debt financing.
Market Acceptance. The Company's sales and marketing strategy is
targeted to sales of its PC-to- TV video-graphics products to the Windows, Mac
OS markets, including computer manufacturers, VGA graphic card developers and
VGA chip developers, as well as to television manufacturers. Although the
Company has to date experienced success in penetrating these markets, there can
be no assurance that the Company's marketing strategy will continue to be
effective and that current customers will continue to buy the Company's
products. Market acceptance of the Company's current and proposed products will
depend upon the ability of the Company to demonstrate the advantages of its
products over other PC-to-TV video- graphics products.
Reliance on Vendors. In the year ended December 31, 1997, approximately
90% of the components for the Company's products were secured and manufactured
on a turnkey basis by two vendors. In the event that either vendor were to cease
supplying the Company, management believes there are alternative vendors for the
components for the Company's products. However, the Company would experience
short-term delays in the shipment of its products.
Dependence on Timely Delivery of the FOCUS Scan 300 Chip. In late 1997,
the Company completed development of an ASIC called the FOCUS Scan 300 Chip
which the Company will incorporate into all of its next generation PC-to-TV
video-graphics products. The Company is relying on an outside vendor to
manufacture its requirements for the Chip. A significant portion of the
Company's anticipated revenues and gross margins for 1998 are dependent on
timely delivery of sufficient quantities of the FOCUS Scan 300 Chip in order to
fill pending and anticipated orders. In the event that the Company does not
receive sufficient quantities of the Chip to fill orders, the Company's revenues
and profitability for 1998 could be adversely effected.
Technological Obsolescence. The Windows and Mac OS markets are
characterized by extensive research and development and rapid technological
change resulting in product life cycles of nine to eighteen months. Development
by others of new or improved products, processes or technologies may make the
Company's products or proposed products obsolete or less competitive. The
Company will be required to devote substantial efforts and financial resources
to enhance its existing products and to develop new products. There can be no
assurance that the Company will succeed with these efforts.
Competition. The Windows and Mac OS markets are extremely competitive.
The Company currently competes with other developers of PC-to-TV conversion
products and with video-graphic integrated circuit developers. Many of the
Company's competitors have greater market recognition and greater financial,
technical, marketing and human resources than the Company. Although the Company
is not currently aware of any announcements by its competitors that would have a
material impact on the Company or its operations, there can be no assurance that
the Company will be able to compete successfully against existing companies or
new entrants to the marketplace.
-6-
<PAGE>
Component Supply Problems. The Company purchases all of its parts from
outside suppliers and from time to time experiences delays in obtaining some
components or peripheral devices. The Company attempts to reduce the risk of
supply interruption by evaluating and obtaining alternative sources for various
components or peripheral devices. However, there can be no assurance that supply
shortages will not occur in the future which could significantly increase the
cost, or delay shipment of, the Company's products, which in turn could
adversely affect its results of operations.
Protection of Proprietary Information. Although the Company currently
has three patents pending, all with respect to its PC-to-TV video conversion
chips, and anticipates filing another patent application in the second quarter
of this year, the Company does not currently have any patents. The Company
treats its technical data as confidential and relies on internal nondisclosure
safeguards, including confidentiality agreements with employees, and on laws
protecting trade secrets to protect its proprietary information. There can be no
assurance that these measures will adequately protect the confidentiality of the
Company's proprietary information or that others will not independently develop
products or technology that are equivalent or superior to those of the Company.
While it may be necessary or desirable in the future to obtain licenses relating
to one or more of its products or relating to current or future technologies,
there can be no assurance that the Company will be able to do so on commercially
reasonable terms.
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<PAGE>
THE COMPANY
FOCUS Enhancements, Inc. (the "Company" or "FOCUS") internally
develops, markets and sells worldwide a line of proprietary PC-to-TV video
conversion products for PC's and Macintoshes (R). Based on an independent survey
by Frost & Sullivan, the Company is an industry leader in the development and
marketing of PC-to-TV video conversion products that make personal computers
"TV-ready" and televisions "PC- ready."
The Company's proprietary PC-to-TV video conversion products include
video output devices marketed and sold under the Company's registered trademark
"TView." All of the Company's PC-to-TV conversion products enable users to
transmit at low-cost, high-quality, computer generated images from any DOS,
Windows or Mac OS based personal computer to any television of any size with a
standard RCA or S-Video interface. FOCUS' PC-to-TV technology provides sharp,
flicker-free, computer-generated images on televisions for multimedia/business
presentations, classroom/training sessions, game playing, collective viewing of
computer applications, and Internet browsing.
The Company markets and sells its FOCUS branded consumer products
globally through a network of distributors, volume resellers, mail order,
value-added resellers ("VARs") and original equipment manufacturers ("OEMs"). In
North America, the Company markets and sells its products through national
distributors such as Ingram Micro D, D & H, Academic and Nuvo; national volume
resellers such as CompUSA, Computer City, Micro Center, Staples and through
third party mail order companies such as MicroWarehouse, Multiple Zones, Global
Direct, PC Connection and CDW.
In addition, the FOCUS branded PC-to-TV products have been selected by
leading personal computer manufacturers to be marketed with the use of their
select brand of personal computers. Compaq, and Toshiba have included the
Company's PC-to-TV products on their selected market price lists, and promote
the FOCUS PC-to-TV products in their box materials.
The Company also markets and sells its products internationally in over
30 countries by independent distributors in each country. These independent
distributors market and sell the FOCUS branded products to retailers, mail order
companies, and VARs in their respective countries.
In addition to the FOCUS branded products, the Company markets, sells
or licenses its proprietary PC-to-TV technology to television manufacturers such
as Philips Consumer Electronics and Zenith Electronics, and to personal computer
manufacturers such as Apple Computer. The Company is currently in discussions
with several other PC manufacturers, television manufacturers, VGA chip
developers and VGA card developers globally.
The Company was founded in December 1991, as a Massachusetts
corporation and was reincorporated in Delaware in April 1993. In December 1993,
the Company acquired Lapis Technologies Inc. ("Lapis"), a developer of
high-quality, low-cost Macintosh PC to TV video graphics products. Effective
September 30, 1996, the Company consummated the acquisition of TView, Inc., a
developer of PC-to-TV video conversion ASIC technology. This acquisition has
played a major strategic role in allowing FOCUS to gain a major technological
lead over competitors in the video scan conversion category and has positioned
FOCUS as a leader in PC-to-TV video conversion technology. On September 30,
1997, the Company sold its line of computer connectivity products.
The Company's principal executive offices are located at 142 North
Road, Sudbury, Massachusetts 01776. Its research and development center is
located at 9275 SW Nimbus Drive, Beaverton, Oregon 97008. The Company's European
sales and marketing office, FOCUS Enhancements B.V., is located at Schipholweg
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<PAGE>
118, Kantorenhuis, 2316 XD Leiden, The Netherlands. The Company's general
telephone number is (978) 371-2000 and its Worldwide Web address is
http://www.focusinfo.com.
USE OF PROCEEDS
The Company will not receive any proceeds from the resale by the
Selling Stockholders of the Shares.
Management intends to use any proceeds from the exercise of the
Warrants for general working capital purposes including expenditures in
connection with the development, sales and marketing of future products for the
Company.
SELLING STOCKHOLDERS
The Shares being offered for resale by the Selling Stockholders were
acquired in connection with the March 98 Offering and include shares of Common
Stock issuable upon exercise of the Warrants. In connection with the March 98
Offering, the Company granted the Selling Stockholders certain registration
rights pursuant to which the Company agreed to keep the Registration Statement,
of which this Prospectus is a part, effective until the date that all of such
Shares have been sold pursuant to the Registration Statement or the Shares are
otherwise eligible for resale pursuant to Rule 144(k) of the Securities Act,
whichever occurs first. The Company has agreed to indemnify the Selling
Stockholders and each of their officers, directors, members, employees,
partners, agents and each person who controls any of the Selling Stockholders
against certain expenses, claims, losses, damages and liabilities (or action,
proceeding or inquiry by any regulator or self-regulatory organization in
respect thereof). The Company has agreed to pay its expenses of registering the
Shares under the Securities Act, including registration and filing fees, blue
sky expenses, printing expenses, accounting fees, administrative expenses and
its own counsel fees.
The following table sets forth the name of each Selling Stockholder,
the number of shares of Common Stock beneficially owned by such Selling
Stockholder as of March 3, 1998 and the number of Shares being offered by each
Selling Stockholder. The Shares being offered hereby are being registered to
permit public secondary trading, and the Selling Stockholders may offer all or
part of the Shares for resale from time to time. However, such Selling
Stockholders are under no obligations to sell all or any portion of such Shares
nor are such Selling Stockholders obligated to sell any Shares immediately under
this Prospectus. All information with respect to share ownership has been
furnished by the Selling Stockholders. Because the Selling Stockholders may sell
all or part of their Shares, no estimates can be given as to the number of
Shares that will be held by any Selling Stockholder upon termination of any
offering made hereby. See "PLAN OF DISTRIBUTION."
<TABLE>
<CAPTION>
Name of Selling Shares Beneficially Shares to be Sold in the Shares Owned After
Stockholder Owned Prior to the Offering the Offering (1)(2)
Offering (1)
<S> <C> <C> <C>
JNC Opportunity Fund 1,419,795 1,419,795 - 0 -
Ltd. (3)
Wharton Capital 15,000 15,000 - 0 -
Partners Ltd. (4)
Elizabeth D'Angelis (4) 6,429 6,429 - 0 -
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<PAGE>
<FN>
(1) Except as set forth in footnote (5) below, beneficial ownership is determined in accordance with Rule
13d-3 of the Exchange Act. The persons named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by them.
(2) Assumes all Shares offered hereby are sold in the Offering.
(3) Includes 327,645 Shares issuable upon exercise of the Investor Warrants. The Investor Warrants are
exercisable until March 3, 2005 if at any time prior to August 25, 1999, the average of the closing
bid prices of the Company's Common Stock during any consecutive 20 trading days is equal to or less
than $2.7469.
(4) Represent Shares issuable upon exercise of the Broker Warrants. The Broker Warrants are exercisable
at a price of $4.2118 per share until March 3, 2003.
(5) Pursuant to the terms of the Warrants, the Warrants are exercisable by any holder only to the extent
that the number of shares of Common Stock thereby issuable, together with the number of shares of
Common Stock owned by such holder and its affiliates (but not including shares of Common Stock
underlying unexercised portions of the Warrants) would not exceed 9.99% of the then outstanding
Common Stock as determined in accordance with Section 13(d) of the Exchange Act. Accordingly, the
number of Shares set forth in the table for a Selling Stockholder may exceed the number of Shares
that such Selling Stockholder could own beneficially at any given time through such Selling
Stockholder's ownership of the Warrants. In that regard, beneficial ownership of such Selling
Stockholder set forth in the table is not determined in accordance with Rule 13d-3 under the Exchange
Act.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The Shares may be sold or distributed from time to time by the Selling
Stockholders or by pledgees, donees or transferees of, or successors in interest
to, the Selling Stockholders, directly to one or more purchasers (including
pledgees) or through brokers, dealers or underwriters who may act solely as
agents or may acquire Shares as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices, which may be changed. The distribution of the Shares
may be effected in one or more of the following methods: (i) ordinary brokers
transactions, which may include long or short sales, (ii) transactions involving
cross or block trades or otherwise on the NASDAQ SmallCap Market, (iii)
purchases by brokers, dealers or underwriters as principal and resale by such
purchasers for their own accounts pursuant to this Prospectus, (iv) "at the
market" to or through market makers or into an existing market for the Common
Stock, (v) in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through agents,
(vi) through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or (vii) any combination of the foregoing, or by
any other legally available means. In addition, the Selling Stockholders or
their successors in interest may enter into hedging transactions with
broker-dealers who may engage in short sales of shares of Common Stock in the
course of hedging the positions they assume with the Selling Stockholders. The
Selling Stockholders or their successors in interest may also enter into option
or other transactions with broker-dealers that require the delivery by such
broker-dealers of the Shares, which Shares may be resold thereafter pursuant to
this Prospectus.
Brokers, dealers, underwriters or agents participating in the
distribution of the Shares may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of Shares for whom such broker-dealers may act as agent or to whom they may sell
as principal, or both (which compensation as to a particular broker-dealer may
be in excess of customary commissions).
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<PAGE>
The Selling Stockholders and any broker-dealers acting in connection with the
sale of the Shares hereunder may be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act, and any commissions received by them and
any profit realized by them on the resale of Shares as principals may be deemed
underwiting compensation under the Securities Act. Neither the Company nor any
Selling Stockholder can presently estimate the amount of such compensation. The
Company knows of no existing arrangements between any Selling Stockholder and
any other stockholder, broker, dealer, underwriter or agent relating to the sale
of distribution of the Shares.
Each Selling Stockholder and any other persons participating in a
distribution of securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which may restrict certain activities of, and limit
the timing of purchases and sales of securities by, Selling Stockholders and
other persons participating in a distribution of securities. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions subject to specified exceptions or
exemptions. All of the foregoing may affect the marketability of the securities
offered hereby.
Any securities covered by this Prospectus that qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule rather
than pursuant to this Prospectus.
There can be no assurance that the Selling Stockholders will sell any
or all of the shares of Common Stock offered by them hereunder.
LEGAL MATTERS
The validity of the Shares offered hereby was passed upon for the
Company by Sullivan & Worcester LLP, Boston, Massachusetts 02109. John A.
Piccione, Esq., Secretary of the Company, is also a partner at Sullivan &
Worcester LLP. Mr. Piccione holds warrants to purchase 72,740 shares of Common
Stock.
EXPERTS
The consolidated financial statements of the Company as of and for the
year ended December 31, 1997 appearing in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997, have been audited by Wolf &
Company, P.C. independent accountants as set forth in their report thereon. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
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<PAGE>
No dealer, salesman or other person has been authorized to give any
information or make any representation other than those contained in this
Prospectus. If given or made, such information or representations must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any of the
securities other than the specific securities to which it relates, or an offer
or solicitation to any person in any jurisdiction where such an offer or
solicitation would be unlawful.
TABLE OF CONTENTS
Page
Available Information....................................2
Incorporation of Certain
Documents by Reference.................................2
Prospectus Summary.......................................4
Risk Factors.............................................5
The Company............................................. 8
Use of Proceeds..........................................9
Selling Stockholders.....................................9
Plan of Distribution....................................10
Legal Matters...........................................11
Experts.................................................11
Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ..........................................11
1,441,224 Shares of Common Stock
FOCUS ENHANCEMENTS, INC.
______________
PROSPECTUS
______________
April |X|, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses in connection with the issuance and distribution of the
Common Stock to be registered are estimated (except for the Securities and
Exchange Commission filing fee) below. All such expenses will be paid by the
Registrant.
Registration Fee Under Securities Act $ 1,341.91
Blue Sky Fees and Expenses 5,000.00
Legal Fees and Expenses 15,000.00
Accounting Fees and Expenses 8,000.00
Printing and Mailing Costs 1,000.00
Miscellaneous Fees and Expenses 2,000.00
-------------
Total Expenses $ 32,341.91
=============
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify, subject to the standards therein prescribed, any
person in connection with any action, suit or proceeding brought or threatened
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation or was serving as such with respect to another
corporation or other entity at the request of such corporation.
The Delaware General Corporation Law, the Company's charter and by-laws
provide for indemnification of the Company's directors and officer for
liabilities and expenses that they may incur in such capacities. In general,
directors and officers are indemnified with respect to actions taken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interests of the Company, and with respect to any criminal action or proceeding,
actions that the indemnitee had no reasonable cause to believe were unlawful.
Reference is made to the Company's Second Restated Certificate of Incorporation,
as amended and Restated By-laws incorporated herein by reference.
The Underwriting Agreement executed in connection with the Company's
initial public offering provides that the underwriters are obligated, under
certain circumstances, to indemnify directors, officers and controlling persons
of the Company against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act"). Reference is made to the form of
Underwriting Agreement previously filed as Exhibit 1.1 to the Company's
Registration Statement on Form SB-2, No. 33-60248-B.
The Company has obtained directors and officers liability insurance for
the benefit of its directors and certain of its officers.
Reference is made to the Underwriting Agreement described above,
pursuant to which the Registrant agreed to indemnify each underwriter and each
person, if any, who controls any underwriter within the meaning of the Act, or
the Securities Exchange Act of 1934, as amended, against certain types of civil
liabilities arising in connection with the aforementioned Registration Statement
or the prospectus contained therein.
II-1
<PAGE>
Item 16. Exhibits
The following documents have been previously filed as Exhibits and are
incorporated herein by reference except those exhibits indicated with an
asterisk which are filed herewith:
Exhibit No. Description
2 Agreement and Plan of Merger dated as of September 30, 1996,
by and among FOCUS Enhancements, Inc., a Delaware corporation,
FOCUS Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of FOCUS, and TView, Inc., a Delaware
Corporation(1).
3.1 Second Restated Certificate of Incorporation, as amended,
incorporated by reference to Exhibit No. 3.1 of the Company's
Registration Statement on Form SB-2 [Reg. No. 33-60248-B] and
as an exhibit to the Company's Form 10-QSB dated November 13,
1995.
3.2 Restated By-laws of the Company(2).
4.1 Specimen certificate for Common Stock of the Company(2).
4.2* Securities Purchase Agreement between the Company and JNC
Opportunity Fund Ltd. (the "Investor") dated February 27,
1998.
4.3* Registration Rights Agreement dated February 27, 1998.
4.4* Common Stock Purchase Warrant dated March 3, 1998 issued to
the Investor.
4.5* Form of Warrant dated March 3, 1998 issued to designees of the
Placement Agent(3).
5.1* Opinion of Sullivan & Worcester LLP
23.1* Consent of Wolf & Company, P.C., independent public
accountants
(1) Filed as an exhibit to the Company's Current Report on Form 8-K
dated November 4, 1996, and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Registration Statement on Form
SB-2, No. 33-60248-B, and incorporated herein by reference.
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
(Section 230.424(b) of 17 C.F.R.) if, in the aggregate,
II-2
<PAGE>
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
and Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the Securities offered herein, and the offering of such
Securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the Shares being registered which remain
unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in such Act and is, therefore,
unenforceable.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective; and
(2) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the Town of Sudbury, Commonwealth of Massachusetts, on April
2, 1998.
FOCUS ENHANCEMENTS, INC.
By: /s/ Thomas L. Massie
Thomas L. Massie
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Form S-3 relating to Common Shares has been signed by the following persons
in the capacities and on the dates indicated. Each person whose signature
appears below hereby authorizes Thomas L. Massie and Christopher P. Ricci, and
each of them, to file one or more amendments (including additional
post-effective amendments) to this Registration Statement, which amendments may
make such changes as any of such persons deem appropriate, and each person,
individually and in each capacity stated below, hereby appoints each of such
persons as attorney-in-fact to execute in his name and on his behalf any of such
amendments to the Registration Statement.
Signature Title Date
- --------- ----- ----
/s/ Thomas L. Massie President, Chief Executive April 2, 1998
Thomas L. Massie Officer and Director
(Principal Executive Officer)
April 2, 1998
/s/ Gary Cebula Vice President of Finance and
Gary Cebula Administration (Principal
Financia land Accounting Officer)
/s/ John C. Cavalier Director April 2, 1998
John C. Cavalier
/s/ William B. Coldrick Director April 2, 1998
William B. Coldrick
/s/ Timothy E. Mahoney Director April 2, 1998
Timothy E. Mahoney
II-5
EXHIBIT 4.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of February
27, 1998, by and between FOCUS ENHANCEMENTS, INC., a corporation organized under
the laws of the State of Delaware (the "Company"), and the purchaser (the
"Purchaser") set forth on the execution page hereof.
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act").
B. The Company desires to sell, and the Purchaser desires to purchase,
upon the terms and conditions stated in this Agreement, for an aggregate
purchase price of Three Million Dollars ($3,000,000) (the "Purchase Price"), (i)
a number of shares (the "Common Shares") of the Company's common stock, par
value $.01 per share (the "Common Stock"), equal to the quotient of (x) the
Purchase Price, divided by (y) seventy-five percent (75%) of the average of the
closing bid prices for the Common Stock as reported on the Nasdaq SmallCap
Market ("SmallCap") by Bloomberg Financial Markets for the five (5) consecutive
trading days ending on the trading day immediately preceding the Closing Date
(as defined in Section 1(c) hereof); and (ii) warrants, in the form attached
hereto as Exhibit A, to acquire a number of shares of Common Stock equal to
thirty percent (30%) of the number of Common Shares purchased by the Purchaser
hereunder (the "Warrants"). The shares of Common Stock issuable upon exercise of
or otherwise pursuant to the Warrants are referred to herein as the "Warrant
Shares." The Common Shares, the Warrants and the Warrant Shares are collectively
referred to herein as the "Securities" and each of them may individually be
referred to herein as a "Security."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit B (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
<PAGE>
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. Purchase of Securities. On the Closing Date (as defined below),
subject to the satisfaction (or waiver) of the conditions set forth in Section 6
and Section 7 below, the Company shall issue and sell to the Purchaser, and the
Purchaser agrees to purchase from the Company, the Common Shares and the
Warrants.
b. Form of Payment. On the Closing Date, the Purchaser shall pay the
Purchase Price by wire transfer to the Company, in accordance with the Company's
written wiring instructions, against delivery of duly executed certificates
representing the Common Shares and Warrants, and the Company shall deliver such
certificates and Warrants against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Common Shares and Warrants to the Purchaser
pursuant to this Agreement (the "Closing") shall be 12:00 noon, New York City
time, on February 27, 1998, subject to a three (3) business day grace period at
either party's option, but in any event not later than March 4, 1998, or such
other time as may be mutually agreed upon by the Company and the Purchaser (the
"Closing Date"). The closing shall occur at the offices of Klehr, Harrison,
Harvey, Branzburg & Ellers, 1401 Walnut Street, Philadelphia, Pennsylvania
19102.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
The Purchaser represents and warrants to the Company as follows:
a. Investment Purpose. Purchaser is purchasing the Securities for
Purchaser's own account for investment purposes only and not with a present view
towards the public sale or distribution thereof. Purchaser understands that
Purchaser must bear the economic risk of this investment indefinitely, unless
the Securities are registered pursuant to the Securities Act and any applicable
state securities or blue sky laws or an exemption from such registration is
available, and that the Company has no present intention of registering the
resale of any such Securities other than as contemplated by the Registration
Rights Agreement. Notwithstanding anything in this Section 2(a) to the contrary,
by making the representations herein, the Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption from the registration requirements under
the Securities Act.
b. Accredited Investor Status. Purchaser is an "Accredited Investor" as
that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Purchaser understands that the Securities
are being offered and sold to Purchaser in reliance upon specific exemptions
from the registration requirements of
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<PAGE>
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of Purchaser to acquire the Securities.
d. Information. Purchaser and its counsel, if any, have been furnished
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities which have been
specifically requested by Purchaser or its counsel. Purchaser and its counsel
have been afforded the opportunity to ask questions of the Company and have
received what Purchaser believes to be satisfactory answers to any such
inquiries. In making its decision to purchase the Securities, Purchaser has
relied solely upon the information concerning the Company contained in this
Agreement, the schedules hereto and the SEC Documents (as defined in Section
3(f) hereof), and no independent inquiry or other investigation conducted by
Purchaser or its counsel or any of its representatives shall modify, amend or
affect Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 below. Purchaser understands that Purchaser's investment
in the Securities involves a high degree of risk.
e. Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(a) the resale of the Securities has been registered thereunder; or (b)
Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions and reasonably acceptable to counsel to the Company)
to the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; or (c) the
Securities are sold under Rule 144 promulgated under the Securities Act (or a
successor rule) ("Rule 144"); or (d) the Securities are sold or transferred to
an affiliate of Purchaser who agrees to sell or otherwise transfer the
Securities only in accordance with the provisions of this Section 2(f) and who
is an Accredited Investor; and (ii) neither the Company nor any other person is
under any obligation to register such Securities under the Securities Act or any
state securities laws (other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. Legends. Purchaser understands that the Warrants and, until such
time as the Common Shares and Warrant Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement or otherwise
may be sold by Purchaser under Rule 144, the certificates for the Common Shares
and Warrant Shares may bear a restrictive legend in substantially the following
form:
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<PAGE>
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state of the United States. The securities represented hereby may
not be offered, sold, transferred or assigned in the absence of an
effective registration statement for the securities under applicable
securities laws unless offered, sold, transferred or assigned under an
available exemption from the registration requirements of those laws.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act as contemplated by the
Registration Rights Agreement; (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions and reasonably acceptable to counsel to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the Securities Act; or (c) such holder provides
the Company with reasonable assurances that such Security can be sold under Rule
144. Purchaser agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, pursuant to an effective
registration statement or under an exemption from the registration requirements
of the Securities Act. In the event the above legend is removed from any
Security and thereafter the effectiveness of a registration statement covering
such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to Purchaser the Company may require that the above
legend be placed on any such Security that cannot then be sold pursuant to an
effective registration statement or under Rule 144 and Purchaser shall cooperate
in the replacement of such legend. Such legend shall thereafter be removed when
such Security may again be sold pursuant to an effective registration statement
or under Rule 144.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their terms.
i. Short Positions. Neither Purchaser nor any of its affiliates,
directly or indirectly, has maintained prior to the execution of this Agreement,
has the intention to maintain or will maintain, any short position in any
securities of the Company until the Common Shares and Warrant Shares have been
registered under the Securities Act.
j. Residency. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the execution page hereto executed by Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Purchaser as follows:
a. Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which
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<PAGE>
it is incorporated, and has the requisite corporate power to own its properties
and to carry on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure so to
qualify would have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on (i) the Securities, (ii) the ability of the
Company to perform its obligations hereunder or under the Warrants or the
Registration Rights Agreement or (iii) the business, operations, properties,
prospects or financial condition of the Company and its subsidiaries, taken as a
whole.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement, to issue and
sell the Common Shares and Warrants in accordance with the terms hereof and to
issue the Warrant Shares upon exercise of the Warrants in accordance with the
terms of such Warrants; (ii) the execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company and
the consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Common Shares and Warrants
and the issuance and reservation for issuance of the Warrant Shares) have been
duly authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, any committee of the Board
of Directors, or its stockholders is required (under Rule 4460(i) promulgated by
the National Association of Securities Dealers ("NASD") or otherwise); (iii)
this Agreement has been duly executed and delivered by the Company; and (iv)
this Agreement constitutes, and, upon execution and delivery by the Company of
the Warrants and the Registration Rights Agreement, such agreements will
constitute, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms.
c. Capitalization. The capitalization of the Company as of December 31,
1997, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans and the number of shares issuable and reserved
for issuance pursuant to securities (other than the Warrants) exercisable or
exchangeable for, or convertible into, any shares of capital stock of the
Company is set forth on Schedule 3(c). All of such outstanding shares of capital
stock have been, or upon issuance in accordance with the terms of any such
warrants, options or preferred stock, will be, validly issued, fully paid and
non-assessable. No authorized but unissued shares of capital stock of the
Company (including the Common Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except for the Securities and as set forth on
Schedule 3(c), as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exercisable or exchangeable for, any shares of capital stock of the Company or
any of its subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
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register the sale of any of its or their securities under the Securities Act
(except the Registration Rights Agreement). Except as set forth on Schedule
3(c), there are no securities or instruments containing antidilution or similar
provisions that will be triggered by the issuance of the Securities in
accordance with the terms of this Agreement or the Warrants. The Company has
furnished to the Purchaser true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("Certificate of
Incorporation"), the Company's By-laws as in effect on the date hereof (the
"By-laws"), and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for capital stock of the
Company.
d. Issuance of Shares. The Common Shares are duly authorized and, upon
issuance in accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability on
the holders thereof. The Warrant Shares are duly authorized and reserved for
issuance, and, upon exercise of the Warrants in accordance with the terms
thereof, will be validly issued, fully paid and non-assessable, and free from
all taxes, liens, claims and encumbrances and will not be subject to preemptive
rights or other similar rights of stockholders of the Company and will not
impose personal liability upon the holder thereof.
e. No Conflicts. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and reservation for
issuance, as applicable, of the Common Shares, Warrants and Warrant Shares) will
not (i) result in a violation of the Certificate of Incorporation or By-laws or
(ii) except as set forth on Schedule 3(e), conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment
(including, without limitation, the triggering of any anti-dilution provisions),
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including U.S. federal and
state securities laws and regulations and rules or regulations of any
self-regulatory organizations to which either the Company or its securities are
subject) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or affected
(except, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its subsidiaries is in default (and no event has occurred which, with
notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for actual or possible
violations, defaults or rights as would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as the
Purchaser owns any of the Securities, in
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violation of any law, ordinance or regulation of any governmental entity, except
for possible violations the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and the Registration Rights Agreement, the
Company is not required to obtain any consent, approval, authorization or order
of, or make any filing or registration with, any court or governmental agency or
any regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Warrants or the
Registration Rights Agreement, in each case in accordance with the terms hereof
or thereof. The Company is not in violation of the listing requirements of the
SmallCap and does not reasonably anticipate that the Common Stock will be
delisted by the SmallCap for the foreseeable future.
f. SEC Documents, Financial Statements. Except as set forth on Schedule
3(f), since December 31, 1994, the Company has timely filed (within applicable
extension periods) all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (all of
the foregoing and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC Documents"). The Company has
delivered to the Purchaser true and complete copies of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act or the Securities Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings made prior
to the date hereof). As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto (except for such
financial statements as have been amended and restated in subsequent filings
made prior to the date hereof). Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to immaterial year-end audit adjustments). Except as set
forth in the financial statements of the Company included in the SEC Documents
filed prior to the date hereof, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to the date of such financial statements, (ii) liabilities
not required by generally accepted accounting principles ("GAAP") to be
disclosed on a balance sheet prepared in accordance with GAAP, and (iii)
obligations under contracts and commitments incurred in the ordinary course of
business and not
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required under generally accepted accounting principles to be reflected in such
financial statements, which liabilities and obligations referred to in clauses
(i), (ii) and (iii), individually or in the aggregate, are not material to the
financial condition or operating results of the Company.
g. Absence of Certain Changes. Since December 31, 1996, there has been
no material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, except as disclosed in
Schedule 3(g) or in the SEC Documents filed prior to the date hereof.
h. Absence of Litigation. Except as disclosed in the SEC Documents
filed prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its subsidiaries, threatened against or affecting the Company, any of
its subsidiaries, or any of their respective directors or officers in their
capacities as such, which could reasonably be expected to have a Material
Adverse Effect. There are no facts which, if known by a potential claimant or
governmental authority, could give rise to a claim or proceeding which, if
asserted or conducted with results unfavorable to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect.
i. Intellectual Property. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "Intangibles")
necessary for the conduct of its business as now being conducted and as
described in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996. To the best knowledge of the Company, neither the
Company nor any subsidiary of the Company infringes or is in conflict with any
right of any other person with respect to any Intangibles which, individually or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect. Except as disclosed in the SEC Documents,
neither the Company nor any of its subsidiaries has received written notice of
any pending conflict with or infringement upon such third party Intangibles,
which alleged pending conflict or alleged infringement, if adversely determined,
would result in a Material Adverse Effect. Except as disclosed in the SEC
Documents, the termination of the Company's ownership of, or right to use, any
single Intangible would not result in a Material Adverse Effect on the Company.
Neither the Company nor any of its subsidiaries has entered into any consent
agreement, indemnification agreement, forbearance to sue or settlement agreement
with respect to the validity of the Company's or its subsidiaries' ownership or
right to use its Intangibles and, to the best knowledge of the Company, there is
no reasonable basis for any such claim to be successful. The Intangibles are
valid and enforceable and no registration relating thereto has lapsed, expired
or been abandoned or canceled or is the subject of cancellation or other
adversarial proceedings, and all applications therefor are pending and in good
standing. The Company and its subsidiaries have complied, in all material
respects, with their respective contractual obligations relating to the
protection of the Intangibles used pursuant to licenses. To the best knowledge
of the
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Company, no person is infringing on or violating the Intangibles owned or used
by the Company or its subsidiaries.
j. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
k. Disclosure. All information relating to or concerning the Company
set forth in this Agreement is true and correct in all material respects and the
Company has not omitted to state any material fact necessary in order to make
the statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or exists
with respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial conditions, which has not been
publicly disclosed but, under applicable law, rule or regulation, would be
required to be disclosed by the Company in a registration statement filed on the
date hereof by the Company under the Securities Act with respect to the primary
issuance of the Company's securities.
l. Acknowledgment Regarding Purchaser's Purchase of the Securities. The
Company acknowledges and agrees that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement or the transactions contemplated hereby, the relationship between
the Company and the Purchaser is "arms-length" and any statement made by the
Purchaser or any of its representatives or agents in connection with this
Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Purchaser's purchase of
Securities and has not been relied upon by the Company, its officers or
directors in any way. The Company further acknowledges that the Company's
decision to enter into this Agreement has been based solely on an independent
evaluation by the Company and its representatives.
m. Form S-3 Eligibility. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances known to the Company that
would prohibit or delay the preparation and filing of a registration statement
on Form S-3 with respect to the Registrable Securities (as defined in the
Registration Rights Agreement).
n. No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
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<PAGE>
o. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions.
p. No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by the Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with Wharton Capital Partners Ltd.,
whose commission and fees will be paid by the Company.
q. Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(q) or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
r. Tax Status. Except as set forth on Schedule 3(r), the Company and
each of its subsidiaries has made or filed all foreign, federal, state and local
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. Except as set forth on Schedule 3(r), there are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to any statute of limitations relating to
the assessment or collection of any federal, state or local tax. Except as set
forth on Schedule 3(r), none of the Company's tax returns is presently being
audited by any taxing authority.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and Section 7 of this
Agreement.
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b. Form D: Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to the Purchaser promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchaser on or prior to the Closing
Date.
c. Reporting Status. So long as the Purchaser beneficially owns any of
the Securities, the Company shall use its best efforts to timely file all
reports required to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination. In addition, the Company shall take
all actions necessary to continue to be eligible to register the resale of its
Common Stock on a registration statement on Form S-3 under the Securities Act.
d. Use of Proceeds. The Company shall use the proceeds from the sale of
the Common Shares and Warrants as set forth in Schedule 4(d).
e. Expenses. At the Closing, the Company shall pay the Purchaser's
legal fees and expenses incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement, the Warrants and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby up to a maximum of Fifteen Thousand Dollars
($15,000). Except as otherwise provided herein and in Section 5 of the
Registration Rights Agreement, each party hereto shall be responsible for its
own expenses incurred in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith.
f. Financial Information. The Company agrees to send the following
reports to the Purchaser until the Purchaser transfers, assigns or sells all of
the Securities: (i) within ten (10) days after the filing with the SEC, a copy
of its Annual Report on Form 10-KSB, its Quarterly Reports on Form 10-QSB, its
proxy statements and any Current Reports on Form 8-K; and (ii) within one (1)
day after release, copies of all press releases issued by the Company or any of
its subsidiaries.
g. Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the full exercise of the Warrants and the
issuance of the Warrant Shares in connection therewith subject to and as
otherwise required by the Warrants.
h. Listing. The Company shall promptly secure the listing of the Common
Shares and Warrant Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as the
Purchaser (or any of its affiliates) owns any Securities, such listing of all
Common Shares and all Warrant Shares. The Company will use its best efforts to
continue the
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listing and trading of its Common Stock on the Nasdaq National Market ("NNM"),
the New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX") or
the SmallCap and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NASD and such
exchanges, as applicable. The Company shall promptly provide to the Purchaser
copies of any notices it receives regarding the continued eligibility of the
Common Stock for trading on the SmallCap or, if applicable, any securities
exchange or automated quotation system on which securities of the same class or
series issued by the Company are then listed or quoted, if any. The obligations
of the Company under this Section 4(h) shall not be imposed on any successor to
the Company's obligations under this Agreement in the event that such successor
is not a publicly traded entity.
i. Corporate Existence. So long as the Purchaser (or any of its
affiliates) beneficially owns any Securities, the Company shall maintain its
corporate existence, and in the event of a merger, consolidation or sale of all
or substantially all of the Company's assets, the Company shall ensure that the
surviving or successor entity in such transaction assumes the Company's
obligations hereunder and under the Warrants and the agreements and instruments
entered into in connection herewith regardless of whether or not the Company
would have had a sufficient number of shares of Common Stock authorized and
available for issuance in order to effect the exercise in full of all Warrants
outstanding as of the date of such transaction.
j. No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of Securities to be integrated with any
other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
k. Legal Compliance. The Company shall conduct its business and the
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Common Shares
issued at the Closing and the Warrant Shares issuable upon the exercise of the
Warrants in such amounts as specified from time to time by the Purchaser to the
Company. To the extent and during the periods provided in Section 2(f) and 2(g)
of this Agreement, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement.
b. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the transfer of the Common
Shares or Warrant Shares prior to registration of the Common Shares and Warrant
Shares under the Securities Act or without an exemption therefrom, will be given
by the
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Company to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Warrants and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Purchaser's obligations and
agreement set forth in Section 2(g) hereof to resell the Securities pursuant to
an effective registration statement or under an exemption from the registration
requirements of applicable securities law.
c. If (i) (A) the Common Shares and Warrant Shares have been registered
under the Securities Act as contemplated by the Registration Rights Agreement,
or (B) the Purchaser provides the Company and the transfer agent with an opinion
of counsel, which opinion of counsel shall be in form, substance and scope
customary for opinions of counsel in comparable transactions and reasonably
acceptable to counsel to the Company, to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
registration, or (C) the Purchaser provides the Company with reasonable
assurances that such Securities may be sold under Rule 144, and (ii) (A) the
Purchaser has delivered to the Company certificates representing the Common
Shares and/or Warrant Shares, as applicable, along with a written request for
the removal of any restrictive legend set forth thereon or (B) in the case of
the exercise by the Purchaser of the Warrants, the Purchaser has complied with
the procedures for exercise set forth in Section 3 of the Warrants, the Company
shall permit the transfer and, in the case of the Common Shares and Warrant
Shares, promptly instruct its transfer agent to issue the Common Shares and/or
Warrant Shares, as applicable, in such name and in such denominations as
specified by the Purchaser. If the Company's transfer agent is participating in
the Depository Trust Company ("DTC") Fast Automated Securities Transfer program
and the Purchaser has provided the Company with appropriate instructions to
effect a DTC Transfer (including the DTC account number of the firm to which
such Common Shares and/or Warrant Shares are to be delivered), the Company shall
cause its transfer agent to electronically transmit the Common Shares and/or
Warrant Shares, as applicable, to the Purchaser or its transferee by crediting
the account of the Purchaser or its transferee with DTC through its Deposit
Withdrawal Agent Commission system ("DTC Transfer"). If the aforementioned
conditions to a DTC Transfer are not satisfied, the Company shall deliver to the
Purchaser or its transferee physical certificates representing the Common Shares
and/or Warrant Shares, as applicable, which certificates shall not bear any
legend restricting transfer of the Common Shares and/or Warrant Shares
represented thereby. Further, a Purchaser may instruct the Company to deliver to
the Purchaser or its transferee unlegended physical certificates (which
certificates shall be in denominations of not less than 50,000 shares)
representing the Common Shares and/or Warrant Shares, as applicable, in lieu of
delivering such shares by way of DTC Transfer.
d. If the Company fails (a "Legend Removal Failure") to deliver such
unlegended Common Shares and/or Warrant Shares to the Purchaser or its
transferee in accordance with Section 5(c) within five (5) business days after
the conditions to such delivery have been satisfied (the "Legend Removal
Period"), then the Company shall pay to the Purchaser an amount equal to One
Hundred Fifty Dollars ($150.00) per day for each day after the expiration of the
Legend Removal Period through and until the date on which the Company issues and
delivers unlegended, freely tradeable shares of Common Stock in accordance with
Section 5(c).
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The payments to which a holder shall be entitled pursuant to this
Section 5(d) are referred to herein as "Legend Removal Payments." The Purchaser
may elect to receive accrued Legend Removal Payments in cash or to convert all
or any portion of such accrued Legend Removal Payments, at any time, into Common
Stock at the lowest Market Price in effect during the period beginning on the
date of the Legend Removal Failure through the date of conversion of such Legend
Removal Payments. In the event the Purchaser elects to take such payment in
cash, cash payment will be made by the Company within five (5) days after its
receipt of written notice of such election from the Purchaser. In the event the
Purchaser elects to convert all or any portion of the Legend Removal Payment
into Common Stock, the Purchaser shall provide written notice of such election
specifying the amount of such Legend Removal Payment to be converted and the
applicable Market Price at which such amount is to be converted. The Company
shall deliver the shares of Common Stock issuable upon any such conversion to
the Purchaser within five (5) days of its receipt of such written notice from
the Purchaser.
Nothing herein shall limit the Purchaser's right to pursue actual
damages for the Company's failure to deliver unlegended Common Shares and
Warrant Shares pursuant to Section 5(c), and the Purchaser shall have the right
to pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Common
Shares and the Warrants to the Purchaser hereunder is subject to the
satisfaction, at or before the Closing Date, of each of the following conditions
thereto, provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion:
a. The Purchaser shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
b. The Purchaser shall have delivered the Purchase Price in accordance
with Section 1(b) above.
c. The representations and warranties of the Purchaser shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and the Purchaser shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Purchaser at
or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
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contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of the Purchaser hereunder to purchase the Common Shares
and the Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in the Purchaser's sole discretion:
a. The Company shall have executed this Agreement, the Warrants and the
Registration Rights Agreement, and delivered the same to the Purchaser.
b. The Company shall have delivered to the Purchaser duly executed
Warrants and certificates (in such denominations as the Purchaser shall request)
representing the Common Shares being so purchased by the Purchaser in accordance
with Section 1(b) above.
c. The Common Stock shall be authorized for quotation and listed on the
SmallCap and trading in the Common Stock (or the SmallCap generally) shall not
have been suspended by the SEC or the SmallCap.
d. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. The Purchaser shall have received a certificate, executed
by the Chief Executive Officer of the Company, dated as of the Closing Date to
the foregoing effect and as to such other matters as may be reasonably requested
by the Purchaser.
e. No litigation, statute, rule, regulation, executive order, decree,
ruling, injunction, action or proceeding shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which questions the validity of, or challenges or
prohibits the consummation of any of the transactions contemplated by this
Agreement.
f. The Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of Exhibit C
attached hereto.
g. There shall have been no material adverse changes and no material
adverse developments in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, since the date hereof, and no
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<PAGE>
information, of which the Purchaser is not currently aware, shall come to the
attention of the Purchaser that is materially adverse to the Company.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company and the
Purchaser irrevocably consent to the jurisdiction of the United States federal
courts and the state courts located in the State of Delaware in any suit or
proceeding based on or arising under this Agreement and irrevocably agree that
all claims in respect of such suit or proceeding may be determined in such
courts. The Company and the Purchaser irrevocably waive the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
and the Purchaser further agree that service of process mailed by first class
mail shall be deemed in every respect effective service of process in any such
suit or proceeding. Nothing herein shall affect the right of the Company or the
Purchaser to serve process in any other manner permitted by law. The Company and
the Purchaser agree that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement. In
the event any signature is delivered by facsimile transmission, the party using
such means of delivery shall cause the manually executed signature page to be
physically delivered to the other party within five (5) days of the execution
hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein. No provision of this Agreement may be
waived other than by an instrument in writing signed by the party to be charged
with enforcement and no provision of this Agreement may be amended other than by
an instrument in writing signed by the Company and the Purchaser.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered
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<PAGE>
personally or by courier or by confirmed telecopy, and shall be effective five
days after being placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by courier or confirmed telecopy, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
Focus Enhancements, Inc.
142 North Road
Sudbury, MA 01776
Telecopy: (978) 371-8471
Attn: Chief Financial Officer
with a copy simultaneously transmitted by like means to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Telecopy: (617) 338-2880
Attn: John Piccione, Esq.
If to the Purchaser, to such address set forth under the Purchaser's
name on the execution page hereto executed by the Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor the Purchaser shall assign
this Agreement, the Registration Rights Agreement or the Warrants or any rights
or obligations hereunder or thereunder. Notwithstanding the foregoing, the
Purchaser may assign its rights hereunder to any of its "affiliates" (as that
term is defined under the Exchange Act) who are Accredited Investors without the
consent of the Company (provided such assignees agree to be bound by all of the
terms and conditions hereof), or to any other person or entity with the consent
of the Company, which consent shall not be unreasonably withheld. This provision
shall not limit the Purchaser's right to transfer the Securities pursuant to the
terms of this Agreement, the Warrants and the Registration Rights Agreement or
to assign the Purchaser's rights hereunder and/or thereunder to any such
transferee.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations, warranties, agreements and covenants
of the Company set forth in Sections 3, 4, 5 and 8 hereof shall survive the
Closing hereunder
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<PAGE>
notwithstanding any investigation conducted by or on behalf of the Purchaser,
and the representations and warranties of the Purchaser set forth in Sections 2
and 5 hereof shall survive the Closing hereunder notwithstanding any
investigation conducted by or on behalf of the Company. Moreover, none of the
representations and warranties made by the Company herein shall act as a waiver
of any rights or remedies the Purchaser may have under applicable federal or
state securities laws and none of the representations and warranties made by the
Purchaser herein shall act as a waiver of any rights or remedies the Company may
have under applicable federal or state securities laws. The Company agrees to
indemnify and hold harmless the Purchaser and each of the Purchaser's officers,
directors, employees, partners, members, agents and affiliates for loss or
damage arising as a result of or related to any breach or alleged breach by the
Company of any of its representations or covenants set forth herein, including
advancement of reasonable expenses as they are incurred. The Purchaser agrees to
indemnify and hold harmless the Company and each of its officers, directors,
agents and affiliates for loss or damage arising as a result of or related to
any breach or alleged breach by the Purchaser of any of its representations or
warranties set forth herein, including advancement of reasonable expenses as
they are incurred.
j. Publicity. The Company and the Purchaser shall have the right to
review before issuance any press releases, SEC or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior review
of the Purchaser, to make any press release or SEC or NASD filings with respect
to such transactions as is required by applicable law and regulations (although
the Purchaser shall be consulted by the Company in connection with any such
press release and filing prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing Date shall not have
occurred on or before March 4, 1998, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to or relating to the termination hereof.
m. [Intentionally omitted.]
n. Equitable Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant
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<PAGE>
to Section 5 hereof), that the Purchaser shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer of the Securities, without the necessity of
showing economic loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Agreement to be duly executed as of the date first above written.
FOCUS ENHANCEMENTS, INC.
By: /s/ Thomas L. Massie
Name: Thomas L. Massie
Title: Chief Executive Officer
PURCHASER:
JNC OPPORTUNITY FUND LTD.
By: /s/ T. Davis
Name: T. Davis
Title: Director
RESIDENCE: Cayman Islands
ADDRESS:
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Williams House
20 Reid Street
Hamilton HM11
Bermuda
Telecopy: (441) 295-2305
Attention: Thomas Davis
with copies of all notices to:
Encore Capital Management, L.L.C.
12007 Sunrise Valley Drive
Suite 460
Reston, VA 20191
Telecopy: (703) 476-7711
Attention: Neil T. Chau
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EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of February
27, 1998, by and among FOCUS ENHANCEMENTS, INC., a corporation organized under
the laws of the State of Delaware (the "Company"), and the undersigned (together
with affiliates, the "Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors (i)
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), and (ii) warrants (the "Warrants") to acquire shares of Common Stock;
and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "Investors" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to
a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "Registrable Securities" means the Common Shares
issued or issuable pursuant to the Securities Purchase Agreement, the Warrant
Shares (including any Warrant Shares issuable with respect to Exercise Default
Payments under the Warrants) issued or issuable
<PAGE>
with respect to the Warrants, any shares of Common Stock issuable pursuant to
Section 2(c) hereof and any shares of capital stock issued or issuable, from
time to time (with any adjustments), as a distribution on or in exchange for or
otherwise with respect to any of the foregoing.
(iv) "Registration Statement" means any registration
statement of the Company under the Securities Act required to be filed pursuant
hereto (including all amendments or supplements to any such Registration
Statement).
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on
or before the thirtieth (30th) day following the date hereof (the "Filing
Date"), file with the SEC a Registration Statement on Form S-3 (or, if Form S-3
is not then available, on such form of Registration Statement as is then
available to effect a registration of all of the Registrable Securities, subject
to the consent of the Initial Investors (as determined pursuant to Section 11(j)
hereof)) covering the resale of all of the Registrable Securities. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to (and
subject to the approval of) the Initial Investors and their counsel prior to its
filing or other submission. The Initial Investors and their counsel shall have
five (5) business days in which to review the Registration Statement and to
provide comments to the Company. If no comments are provided by the Initial
Investors and their counsel within such five (5) business day period, the
Initial Investors shall be deemed to have approved such Registration Statement.
b. [Intentionally omitted.]
c. Payments by the Company. The Company shall cause the
Registration Statement required to be filed pursuant to Section 2(a) hereof to
become effective as soon as practicable, but in no event later than the
ninetieth (90th) day following the date hereof (the "Registration Deadline").
Notwithstanding the foregoing, the Registration Deadline shall be extended by a
period of thirty (30) days in the event the Company sustains a material loss,
whether or not insured, by reason of fire, earthquake, flood, accident or other
calamity. If (i) the Registration Statement required to be filed by the Company
pursuant to Section 2(a) hereof is not declared effective by the SEC on or
before the Registration Deadline or (ii) if, after such Registration Statement
has been declared effective by the SEC, sales of all of the Registrable
Securities cannot be made pursuant to such Registration Statement (by reason of
a stop order or the Company's failure to update the Registration Statement or
any other reason outside the control of the Investors) or (iii) the Common Stock
(including all of the Registrable Securities) is not listed or included for
quotation on the Nasdaq National Market ("NNM"), the Nasdaq SmallCap Market
("SmallCap"), the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX") at any time after the Registration Deadline and prior to
the one (1) year anniversary of the effective date of the Registration
Statement, then the Company will make payments to the
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<PAGE>
Investors in such amounts and at such times as shall be determined pursuant to
this Section 2(c) as partial relief for the damages to the Investors by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity). The Company shall pay to each Investor an amount equal to
the product of (i) the aggregate Purchase Price of the Common Shares and
Warrants held by such Investor (including, without limitation, Warrants that
have been exercised for Warrant Shares then held by such Investor) (the
"Aggregate Share Price"), multiplied by (ii) two hundredths (.02), for each
thirty (30) day period (or portion thereof) (A) after the Registration Deadline
and prior to the date the Registration Statement filed pursuant to Section 2(a)
is declared effective by the SEC, (B) during which sales of any Registrable
Securities cannot be made pursuant to such Registration Statement after the
Registration Statement has been declared effective and (C) after the
Registration Deadline and prior to the one (1) year anniversary of the date the
Registration Statement filed pursuant to Section 2(a) is declared effective by
the SEC during which the Common Stock (including all of the Registrable
Securities) is not listed or included for quotation on the NNM, SmallCap, NYSE
or AMEX; provided, however, that there shall be excluded from each such period
any delays which are solely attributable to changes (other than corrections of
Company mistakes with respect to information previously provided by the
Investors) required by the Investors in the Registration Statement with respect
to information relating to the Investors, including, without limitation, changes
to the plan of distribution. (For example, if the Registration Statement is not
effective by the Registration Deadline, the Company would pay $20,000 for each
thirty (30) day period thereafter with respect to each $1,000,000 of Aggregate
Share Price until the Registration Statement becomes effective.) Such amounts
shall be paid in cash or, at each Investor's option, may be convertible into
Common Stock at the lower of the Exercise Price or the Market Price (each as
defined in the Warrants) in effect at the time of such conversion. Any shares of
Common Stock issued upon conversion of such amounts shall be Registrable
Securities. If the Investor desires to convert the amounts due hereunder into
Registrable Securities it shall so notify the Company in writing within two (2)
business days after the date on which such amounts are first payable in cash and
such amounts shall be so convertible beginning on the last day upon which the
cash amount would otherwise be due in accordance with the following sentence.
Payments of cash pursuant hereto shall be made within five (5) days after the
end of each period that gives rise to such obligation, provided that, if any
such period extends for more than thirty (30) days, interim payments shall be
made for each such thirty (30) day period.
d. [Intentionally omitted.]
e. Eligibility for Form S-3. The Company represents and
warrants that it meets the requirements for the use of Form S-3 for registration
of the sale by the Initial Investors and any other Investor of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
3
<PAGE>
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare and file with the SEC the
Registration Statement required by Section 2(a) as soon as practicable after the
date hereof (but in no event later than the Filing Date), and cause such
Registration Statement relating to Registrable Securities to become effective as
soon as practicable after such filing (but in no event later than the
Registration Deadline), and keep the Registration Statement effective pursuant
to Rule 415 at all times until such date as is the earlier of (i) the date on
which all of the Registrable Securities have been sold and (ii) the date on
which all of the Registrable Securities (in the reasonable opinion of counsel to
the Initial Investors) may be immediately sold to the public without
registration or restriction pursuant to Rule 144(k) under the Securities Act or
any successor provision (the "Registration Period"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and all documents incorporated by reference therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof as set forth in the Registration Statement.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and each letter written by or on behalf of the
Company to the SEC or the staff of the SEC (including, without limitation, any
request to accelerate the effectiveness of any Registration Statement or
amendment thereto), and each item of correspondence from the SEC or the staff of
the SEC, in each case relating to such Registration Statement (other than any
portion, if any, thereof which contains information for which the Company has
sought confidential treatment), (ii) on the date of effectiveness of the
Registration Statement or any amendment thereto, a notice stating that the
Registration Statement or amendment has been declared effective, and (iii) such
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
4
<PAGE>
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. [Intentionally omitted.]
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable moment (including in each
case by amending or supplementing such Registration Statement) and to notify
each Investor who holds Registrable Securities being sold of the issuance of
such order and the resolution thereof (and if such Registration Statement is
supplemented or amended, deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request).
h. The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC, and not file any document in a form to which such counsel
reasonably objects and will not request acceleration of the effectiveness of any
Registration Statement without prior notice to such counsel.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an
5
<PAGE>
earnings statement (in form complying with the provisions of Rule 158 under the
Securities Act) covering a twelve-month period beginning not later than the
first day of the Company's fiscal quarter next following the effective date of
the Registration Statement.
j. [Intentionally omitted.]
k. The Company shall make available for inspection by (i) any
Investor and (ii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein shall be deemed to
limit the Investors' ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
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<PAGE>
m. The Company shall use its best efforts to promptly either
(i) cause all of the Registrable Securities covered by the Registration
Statement to be listed on the NYSE or the AMEX or another national securities
exchange and on each additional national securities exchange on which securities
of the same class or series issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) secure the designation and quotation of all of the
Registrable Securities covered by the Registration Statement on the NNM or
SmallCap and, without limiting the generality of the foregoing, to arrange for
or maintain at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
n. Chase Mellon Shareholder Services, LLC (or any substitute
transfer agent and registrar selected by the Company) shall act as the transfer
agent and registrar for the Registrable Securities.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the Investors may reasonably request and registered in such names as the
Investors may request, and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel selected by the Company
to deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an opinion of such counsel in the form attached hereto as Exhibit 1.
p. At the request of any Investor (which shall be limited to
two (2) requests), the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related
to the Registration Statement and offering and sale of securities and all
applicable rules and regulations of governmental authorities in connection
therewith (including, without limitation, the Securities Act and the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated by
the SEC.)
r. The Company shall take all such other actions as any
Investor reasonably requests in order to expedite or facilitate the disposition
of the Registrable Securities.
s. From and after the date of this Agreement, the Company
shall not, and shall not agree to, allow the holders of any securities of the
Company to include any of their securities in any Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section 3(b)
hereof without the consent of the holders of a majority in interest of the
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<PAGE>
Registrable Securities; provided, however, that the Company shall be permitted
to include in any such Registration Statement (including any amendments or
supplements thereto) any shares of Common Stock issuable by the Company upon
exercise of or otherwise pursuant to those certain stock purchase warrants
issued to each of Wharton Capital Partners Ltd. and Elizabeth D'Angelis on
February 27, 1998.
All obligations of the Company under this Section 3 (except for those
obligations set forth in paragraph (l) of this Section 3) shall terminate as
soon as the Investors no longer own any Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. [Intentionally omitted.]
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Sections 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Sections 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. [Intentionally omitted.]
8
<PAGE>
5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred in connection with registrations,
filings or qualifications pursuant to Sections 2 and 4, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, the fees and disbursements of counsel for the Company and the
fees and disbursements contemplated by Section 3(k) hereof shall be borne by the
Company. In addition, the Company shall pay all of the Investors' costs and
expenses (including legal fees) incurred in connection with the enforcement of
the rights of the Investors hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees,
agents and each person who controls any Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), if any, (each, an "Indemnified Person"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any other
applicable securities law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which
9
<PAGE>
consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, if such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9 hereof.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder within the
meaning of the Securities Act or the Exchange Act (collectively and together
with an Indemnified Person, an "Indemnified Party"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to Section 6(c) such Investor will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds actually
received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9 hereof. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented, and the Indemnified Party
failed to utilize such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of
10
<PAGE>
the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding or the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person or the Indemnified Party and the
indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in addition
to those available to such indemnifying party. The indemnifying party shall pay
for only one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such legal counsel shall be selected by
Investors holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates (with the approval of
the Initial Investors if they hold Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation, and (iii) contribution (together with any
indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
11
<PAGE>
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. file with the SEC in a timely manner and make and keep
available all reports and other documents required of the Company under the
Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 4(c) of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents is required
for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns
Warrants or Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Investors to sell such securities under Rule
144 without registration.
The obligations of the Company set forth in this Section 8 shall
terminate as soon as the Investors may resell the Registrable Securities
pursuant to Rule 144(k).
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the Common Shares, the Warrants or the Registrable Securities if: (i)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company after such
assignment, (ii) the Company is furnished with written notice of (a) the name
and address of such transferee or assignee, and (b) the securities with respect
to which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act
and applicable state securities laws, (iv) the transferee or assignee agrees in
writing for the benefit of the Company to be bound by all of the provisions
contained herein, and (v) such transfer shall have been made in accordance with
the applicable requirements of the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
Investors who hold a majority in interest of the Registrable
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<PAGE>
Securities; provided, however, that no consideration shall be paid to an
Investor by the Company in connection with an amendment hereto unless each
Investor similarly affected by such amendment receives a pro-rata amount of
consideration from the Company. Unless an Investor otherwise agrees, each
amendment hereto must similarly affect each Investor. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five (5) days after being placed in the mail,
if mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Focus Enhancements, Inc.
142 North Road
Sudbury, MA 01776
Telecopy: (978) 371-8471
Attn: Chief Financial Officer
with a copy simultaneously transmitted by like means to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Telecopy: (617) 338-2880
Attn: John Piccione, Esq.
and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b).
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
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<PAGE>
d. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in the State of Delaware. The Company irrevocably consents
to the jurisdiction of the United States federal courts and the state courts
located in the State of Delaware in any suit or proceeding based on or arising
under this Agreement and irrevocably agrees that all claims in respect of such
suit or proceeding may be determined in such courts. The Company irrevocably
waives the defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Company further agrees that service of process upon the Company,
mailed by first class mail shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein shall
affect the Investors' right to serve process in any other manner permitted by
law. The Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
e. This Agreement, the Securities Purchase Agreement
(including all schedules and exhibits thereto) and the Warrants constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. This Agreement, the Securities Purchase Agreement and the
Warrants supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents, approvals and other determinations to be made
by the Investors or the Initial Investors pursuant to this Agreement shall be
made by the Investors or the Initial Investors holding a majority in interest of
the Registrable Securities (determined as if all Warrants then outstanding had
been exercised for Registrable Securities) held by all Investors or Initial
Investors, as the case may be.
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<PAGE>
k. For purposes of this Agreement, the term "business day"
means any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
FOCUS ENHANCEMENTS, INC.
By: /s/ Thomas L. Massie
Name: Thomas L. Massie
Its: Chief Executive Officer
INITIAL INVESTORS:
JNC OPPORTUNITY FUND, LTD.
By: /s/ T. Davis
Name: T. Davis
Its: Director
<PAGE>
EXHIBIT 1
to
Registration
Rights
Agreement
[Date]
[Name and address
of transfer agent]
RE: FOCUS ENHANCEMENTS, INC.
Ladies and Gentlemen:
We are counsel to FOCUS ENHANCEMENTS, INC., a corporation organized
under the laws of the State of Delaware (the "Company"), and we understand that
[Name of Investor] (the "Holder") has purchased from the Company (i) shares of
the Company's common stock, par value $______ per share (the "Common Stock"),
and (ii) warrants (the "Warrants") to acquire shares of Common Stock. Pursuant
to a Registration Rights Agreement, dated as of February 27, 1998, by and among
the Company and the signatories thereto (the "Registration Rights Agreement"),
the Company agreed with the Holder, among other things, to register the
Registrable Securities (as that term is defined in the Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "Securities Act"),
upon the terms provided in the Registration Rights Agreement. In connection with
the Company's obligations under the Registration Rights Agreement, on
__________, 1998, the Company filed a Registration Statement on Form S-___ (File
No. 333- _____________) (the "Registration Statement") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities, which
names the Holder as a selling stockholder thereunder. The Registration Statement
was declared effective by the SEC on _____________, 1998.
[Other customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other customary language to be included.]
Very truly yours,
cc: [Name of Investor]
EXHIBIT 4.4
VOID AFTER 5:00 P.M., NEW YORK CITY
TIME, ON MARCH 3, 2005
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase 327,645 Shares of
Common Stock, par value $.01 per share
Date: March 3, 1998
FOCUS ENHANCEMENTS, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, JNC OPPORTUNITY FUND LTD., or
its registered assigns, is entitled to purchase from FOCUS ENHANCEMENTS, INC., a
corporation organized under the laws of the State of Delaware (the "Company"),
at any time or from time to time during the period specified in Section 2
hereof, Three Hundred Twenty-Seven Thousand Six Hundred Forty-Five (327,645)
fully paid and nonassessable shares of the Company's common stock, par value
$.01 per share (the "Common Stock"), at an exercise price per share (the
"Exercise Price") determined in accordance with Section 1 hereof. The number of
shares of Common Stock purchasable hereunder (the "Warrant Shares") and the
Exercise Price are subject to adjustment as provided in Section 5 hereof. The
term "Warrants" means this Warrant and the other warrants of the Company, if
any, issued pursuant to that certain Securities Purchase Agreement, dated as of
February 27, 1998, by and between the Company and the initial holder of this
Warrant (the "Securities Purchase Agreement").
<PAGE>
This Warrant is subject to the following terms, provisions, and
conditions:
1. Determination of Exercise Price. The Exercise Price shall initially
equal the Market Price (as defined in Section 5(j) hereof) in effect on the date
of initial issuance of this Warrant (the "Issue Date") and shall be subject to
adjustment as provided below and in Section 5 hereof. If, at any time during the
five hundred forty (540) day period following the Issue Date (the "Reset
Period"), the average of the Closing Bid Prices (as defined in Section 5(j)
hereof) for the Common Stock for any period of twenty (20) consecutive trading
days is less than or equal to seventy-five percent (75%) of the Market Price in
effect on the Issue Date (the occurrence of such event being hereinafter
referred to as a "Reset Event" and the date immediately following the occurrence
of a Reset Event being hereinafter referred to as a "Reset Date"), then the
Exercise Price shall thereafter be adjusted to equal the lesser of (i) the
Market Price determined as of the Reset Date and (ii) the Closing Bid Price in
effect on the trading day immediately preceding such Reset Date. The Exercise
Price shall be similarly adjusted upon each additional occurrence of a Reset
Event during the Reset Period; provided, however, that in no event shall any
such adjustment result in an increase to the Exercise Price.
2. Period of Exercise. This Warrant shall be exercisable at any time
and from time to time on or after the initial occurrence of a Reset Event and
before 5:00 p.m., New York City time, on the seventh (7th) anniversary of the
Issue Date (the "Exercise Period"). If a Reset Event does not occur during the
Reset Period, this Warrant shall be null and void.
3. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 8 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day
during the Exercise Period at the Company's principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof), and upon (i) payment to the Company in cash, by certified or
official bank check or by wire transfer for the account of the Company, of the
Exercise Price for the Warrant Shares specified in the Exercise Agreement or
(ii) if the holder is effectuating a Cashless Exercise (as defined in Section
12(c) hereof) pursuant to Section 12(c) hereof, delivery to the Company of a
written notice of an election to effect a Cashless Exercise for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above or, if such date is not a business date, on the next succeeding
business date. The Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding two (2) business days,
after this Warrant shall have been so exercised in accordance with the foregoing
(the "Delivery Period"). If the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
so long as the certificates therefor do not bear a legend and the holder is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its transfer agent to electronically
2
<PAGE>
transmit the Warrant Shares so purchased to the holder by crediting the account
of the holder or its nominee with DTC through its Deposit Withdrawal Agent
Commission system ("DTC Transfer"). If the aforementioned conditions to a DTC
Transfer are not satisfied, the Company shall deliver to the holder physical
certificates representing the Warrant Shares so purchased. Further, the holder
may instruct the Company to deliver to the holder physical certificates
representing the Warrant Shares so purchased in lieu of delivering such shares
by way of DTC Transfer. Any certificates so delivered shall be in such
denominations as may be reasonably requested by the holder hereof, shall be
registered in the name of such holder or such other name as shall be designated
by such holder and, following the date on which the Warrant Shares have been
registered under the Securities Act pursuant to that certain Registration Rights
Agreement, dated as of February 27, 1998, by and between the Company and the
other signatories thereto (the "Registration Rights Agreement") or otherwise may
be sold by the holder pursuant to Rule 144 promulgated under the Securities Act
(or a successor rule), shall not bear any restrictive legend. If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired,
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement (including pursuant to a
Cashless Exercise), and the Company fails for any reason to deliver, on or prior
to the fourth business day following the expiration of the Delivery Period for
such exercise, the number of shares of Common Stock to which the holder is
entitled upon such exercise (an "Exercise Default"), then the Company shall pay
to the holder payments ("Exercise Default Payments") for an Exercise Default in
an amount equal to One Hundred Fifty Dollars ($150.00) per day for each day
after the expiration of the Delivery Period through and until the date on which
the Company issues and delivers certificates for the shares of Common Stock to
which the holder is entitled upon such exercise. The accrued Exercise Default
Payment for each calendar month shall be paid in cash or shall be convertible
into Common Stock, at the holder's option, as follows:
(a) In the event holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth (5th) day of the month
following the month in which it has accrued; and
(b) In the event holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock at the lower
of the Exercise Price or the Market Price (as defined in Section 5(j)) (as in
effect at the time of conversion) at any time after the fifth (5th) day of the
month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms of Section 4(b) hereof or to
otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and the holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
3
<PAGE>
4. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide for the
exercise in full of this Warrant (without giving effect to the limitations on
exercise set forth in Section 8(g) hereof).
(c) Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of this Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed or become listed (subject to official
notice of issuance upon exercise of this Warrant) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this Warrant;
and the Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all of the Company's assets.
(f) Blue Sky Laws. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this
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Warrant prior to such date; provided, however, that the Company shall not be
required to qualify as a foreign corporation or file a general consent to
service of process in any such jurisdiction.
5. Antidilution Provisions. The Exercise Price and the number of
Warrant Shares issuable hereunder shall be subject to adjustment from time to
time as provided in this Section 5.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent.
(a) Subdivision or Combination of Common Stock. If the
Company, at any time after the Issue Date, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time after the Issue Date, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased. In addition, upon any
adjustment of the Exercise Price in accordance with this Section 5(a), the
"Market Price in effect on the Issue Date" used for purposes of determining the
occurrence of a Reset Event pursuant to Section 1 hereof shall also be
proportionately adjusted.
(b) Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 5, the number of
shares of Common Stock issuable upon exercise of this Warrant and for which this
Warrant is or may become exercisable shall be adjusted by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable or for which this Warrant is or
may become exercisable (as applicable) upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(c) Consolidation, Merger or Sale. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company at any time after the Issue Date, then as a condition
of such consolidation, merger or sale or conveyance, adequate provision will be
made whereby the holder of this Warrant will have the right to acquire and
receive upon exercise of this Warrant in lieu of the shares of Common Stock
immediately theretofore acquirable upon the exercise of this Warrant, such
shares of stock, securities, cash or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In any such case,
the Company will make appropriate provision to insure that the provisions of
this Section 5 will thereafter be applicable as nearly as may be in relation to
any shares of stock or securities thereafter deliverable upon the exercise of
this Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this
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Warrant and the obligations to deliver to the holder of this Warrant such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
the holder may be entitled to acquire.
(d) Distribution of Assets. In case the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, stock repurchase by
way of return of capital or otherwise (including any dividend or distribution to
the Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time after the Issue
Date, then the holder of this Warrant shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets (or rights) which would have been
payable to the holder had such holder been the holder of such shares of Common
Stock on the record date for the determination of shareholders entitled to such
Distribution.
(e) Notice of Adjustment. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(f) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(g) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
(h) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
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(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable estimate thereof by the Company)
when the same shall take place. Such notice shall also specify the date on which
the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least seventy-five
(75) days prior to the record date or the date on which the Company's books are
closed in respect thereto. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.
(i) Certain Events. If, at any time after the Issue Date, any
event occurs of the type contemplated by the adjustment provisions of this
Section 5 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 5(e) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(j) Certain Definitions.
(i) "Closing Bid Price" means, as of any date, (i) the
closing bid price for the shares of Common Stock as reported on the Nasdaq
SmallCap Market by Bloomberg Financial Markets or a comparable reporting service
of national reputation selected by the Company and reasonably acceptable to the
holder hereof if Bloomberg Financial Markets is not then reporting closing bid
prices for the Common Stock (collectively, "Bloomberg"), or (ii) if the Nasdaq
SmallCap Market is not the principal trading market for the shares of Common
Stock, the last reported sale price reported by Bloomberg on the principal
trading market for the Common Stock, or, if there is no sale price reported, the
last bid price reported by Bloomberg, or (iii) if the foregoing do not apply,
the last sale price of such security in the over-the-counter market on the pink
sheets or bulletin board for such security as reported by Bloomberg, or if no
sale price is so reported for such security, the last bid price of such security
as reported by Bloomberg, or (iv) if the Closing Bid Price cannot be calculated
as of such date on any of the foregoing bases, the Closing Bid Price of the
Common Stock on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by the Company and reasonably
acceptable to the holder, with the costs of the appraisal to be borne by the
Company. The manner of determining the Closing Bid Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made hereunder.
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(ii) "Common Stock," for purposes of this Section 5,
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 5(c) hereof, the stock or other securities or
property provided for in such Section.
(iii) "Market Price" means, as of any date, the average of
the Closing Bid Prices for the Common Stock for the five (5) consecutive trading
days ending on the trading day immediately preceding such date of determination
(subject to equitable adjustment for any stock splits, stock dividends,
reclassifications or similar events occurring during such five (5) trading day
period).
6. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
7. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
8. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 8(e) below, provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Sections 8(f) and (g) hereof and to the
provisions of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until
due presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 9 hereof are assignable only in
accordance with the provisions of the Registration Rights Agreement.
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Section 8(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which
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<PAGE>
may be purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 8, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 8. The Company
shall indemnify and reimburse the holder of this Warrant for all costs and
expenses (including legal fees) incurred by such holder in connection with the
enforcement of its rights hereunder.
(e) Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable transactions
and reasonably acceptable to counsel for the Company) to the effect that such
exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws (the cost
of which shall be borne by the Company if the Company's counsel renders such an
opinion and up to $250 of such cost shall be borne by the Company if the
holder's counsel is requested to render such opinion), (ii) that the holder or
transferee execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter, or status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act.
(g) Additional Restrictions on Exercise or Transfer.
Notwithstanding anything contained herein to the contrary, unless the holder
hereof delivers a waiver in accordance with the last sentence of this Section
8(g), this Warrant shall not be exercisable by a holder hereof to the extent
(but only to the extent) that (a) the number of shares of Common Stock
beneficially owned
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by such holder and its affiliates (other than shares of Common Stock which may
be deemed beneficially owned through the ownership of the unexercised portion of
the Warrants or the unexercised or unconverted portion of any other securities
of the Company subject to a limitation on conversion or exercise analogous to
the limitation contained herein) and (b) the number of shares of Common Stock
issuable upon exercise of the Warrant (or portion thereof) with respect to which
the determination described herein is being made, would result in beneficial
ownership by such holder and its affiliates of more than 9.99% of the
outstanding shares of Common Stock. To the extent the above limitation applies,
the determination of whether and to what extent this Warrant shall be
exercisable vis-a-vis other securities owned by such holder shall be in the sole
discretion of the holder and submission of this Warrant for full or partial
exercise shall be deemed to be the holder's determination of whether and the
extent to which this Warrant is exercisable, in each case subject to such
aggregate percentage limitation. No prior inability to exercise the Warrant
pursuant to this Section shall have any effect on the applicability of the
provisions of this Section with respect to any subsequent determination of
exerciseability. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (a) hereof. Except as provided in the immediately
succeeding sentence, the restrictions contained in this Section 8(g) may not be
amended without the consent of the holder of this Warrant and the holders of a
majority of the Company's then outstanding Common Stock. Notwithstanding the
foregoing, the holder hereof may waive the restrictions set forth in this
Section 8(g) by written notice to the Company upon not less than sixty-one (61)
days prior notice (with such waiver taking effect only upon the expiration of
such sixty-one (61) day notice period).
9. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein.
10. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
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If to the Company:
Focus Enhancements, Inc.
142 North Road
Sudbury, MA 01776
Telecopy: (978) 371-8471
Attn: Chief Financial Officer
with a copy simultaneously transmitted by like means to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Telecopy: (617) 338-2880
Attn: John Piccione, Esq.
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 10.
11. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Warrant and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
12. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
(b) Descriptive Headings. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) Cashless Exercise. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised at any time after the
first anniversary of the Issue Date until the end of the Exercise Period, by
presentation and
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surrender of this Warrant to the Company at its principal executive offices with
a written notice of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "Cashless Exercise").
In the event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, the holder shall surrender this Warrant for that number of shares of
Common Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price of a share of the Common Stock
on the date of exercise and the Exercise Price, and the denominator of which
shall be the then current Market Price per share of Common Stock.
(d) Business Day. For purposes of this Warrant, the term
"business day" means any day, other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law, regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
FOCUS ENHANCEMENTS, INC.
By: /s/ Thomas L. Massie
Name: Thomas L. Massie
Title: Chief Executive Officer
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FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: FOCUS ENHANCEMENTS, INC.
142 North Road
Sudbury, MA 01776
Telecopy: (978) 371-8471
Attn: Chief Financial Officer
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of FOCUS ENHANCEMENTS, INC., a
corporation organized under the laws of the State of Delaware (the "Company"),
evidenced by the attached Warrant, and herewith makes payment of the Exercise
Price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144 is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
o The undersigned requests that the Company cause its transfer agent to
electronically transmit the Common Stock issuable pursuant to this
Exercise Agreement to the account of the undersigned or its nominee
(which is _________________) with DTC through its Deposit Withdrawal
Agent Commission System ("DTC Transfer").
o In lieu of receiving the shares of Common Stock issuable pursuant to
this Exercise Agreement by way of DTC Transfer, the undersigned hereby
requests that the Company cause its transfer agent to issue and deliver
to the undersigned physical certificates representing such shares of
Common Stock.
The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:
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Dated:_________________ _____________________________________
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
15
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
- ---------------- ------- ------------
, and hereby irrevocably constitutes and appoints
_____________________________________ as agent and attorney-in-fact to transfer
said Warrant on the books of the within-named corporation, with full power of
substitution in the premises.
Dated: _____________________, ____
In the presence of
- ------------------
Name: ____________________________
Signature: _______________________
Title of Signing Officer or Agent (if any):
Address:
------------------------
------------------------
------------------------
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
EXHIBIT 4.5
VOID AFTER 5:00 P.M., NEW YORK CITY
TIME, ON MARCH 3, 2003
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase _______ Shares of
Common Stock, par value $.01 per share
Date: March 3, 1998
FOCUS ENHANCEMENTS, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, ____________________________,
or its registered assigns, is entitled to purchase from FOCUS ENHANCEMENTS,
INC., a corporation organized under the laws of the State of Delaware (the
"Company"), at any time or from time to time during the period specified in
Section 2 hereof, Fifteen Thousand (15,000) fully paid and nonassessable shares
of the Company's common stock, par value $.01 per share (the "Common Stock"), at
an exercise price per share (the "Exercise Price") determined in accordance with
Section 1 hereof. The number of shares of Common Stock purchasable hereunder
(the "Warrant Shares") and the Exercise Price are subject to adjustment as
provided in Section 5 hereof.
<PAGE>
This Warrant is subject to the following terms, provisions, and
conditions:
1. Determination of Exercise Price. The Exercise Price shall initially
equal 115% of the Market Price (as defined in Section 5(j) hereof) in effect on
the date of initial issuance of this Warrant (the "Issue Date") and shall be
subject to adjustment as provided in Section 5 hereof.
2. Period of Exercise. This Warrant shall be exercisable at any time
and from time to time on or after the Issue Date and before 5:00 p.m., New York
City time, on the fifth (5th) anniversary of the Issue Date (the "Exercise
Period").
3. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 8 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day
during the Exercise Period at the Company's principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof), and upon (i) payment to the Company in cash, by certified or
official bank check or by wire transfer for the account of the Company, of the
Exercise Price for the Warrant Shares specified in the Exercise Agreement or
(ii) if the holder is effectuating a Cashless Exercise (as defined in Section
12(c) hereof) pursuant to Section 12(c) hereof, delivery to the Company of a
written notice of an election to effect a Cashless Exercise for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above or, if such date is not a business date, on the next succeeding
business date. The Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding two (2) business days,
after this Warrant shall have been so exercised in accordance with the foregoing
(the "Delivery Period"). If the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
so long as the certificates therefor do not bear a legend and the holder is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its transfer agent to electronically transmit the Warrant
Shares so purchased to the holder by crediting the account of the holder or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC
Transfer"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Company shall deliver to the holder physical certificates
representing the Warrant Shares so purchased. Further, the holder may instruct
the Company to deliver to the holder physical certificates representing the
Warrant Shares so purchased in lieu of delivering such shares by way of DTC
Transfer. Any certificates so delivered shall be in such denominations as may be
reasonably requested by the holder hereof, shall be registered in the name of
such holder or such other name as shall be designated by such holder and,
following the date on which the Warrant Shares have been registered under the
Securities Act or otherwise may be sold by the holder pursuant to Rule 144
promulgated under the Securities Act (or a successor rule), shall not bear any
restrictive legend. If this Warrant shall have been exercised only in part,
then, unless this Warrant has expired, the Company shall, at its expense, at the
time of
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delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement (including pursuant to a
Cashless Exercise), and the Company fails for any reason to deliver, on or prior
to the fourth business day following the expiration of the Delivery Period for
such exercise, the number of shares of Common Stock to which the holder is
entitled upon such exercise (an "Exercise Default"), then the Company shall pay
to the holder payments ("Exercise Default Payments") for an Exercise Default in
an amount equal to One Hundred Fifty Dollars ($150.00) per day for each day
after the expiration of the Delivery Period through and until the date on which
the Company issues and delivers certificates for the shares of Common Stock to
which the holder is entitled upon such exercise. The accrued Exercise Default
Payment for each calendar month shall be paid in cash or shall be convertible
into Common Stock, at the holder's option, as follows:
(a) In the event holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth (5th) day of the month
following the month in which it has accrued; and
(b) In the event holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock at the lower
of the Exercise Price or the Market Price (as defined in Section 5(j)) (as in
effect at the time of conversion) at any time after the fifth (5th) day of the
month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms of Section 4(b) hereof or to
otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and the holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
4. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide for the
exercise in full of this Warrant (without giving effect to the limitations on
exercise set forth in Section 8(g) hereof).
(c) Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of this Warrant upon each
national securities exchange or
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automated quotation system, if any, upon which shares of Common Stock are then
listed or become listed (subject to official notice of issuance upon exercise of
this Warrant) and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all of the Company's assets.
(f) Blue Sky Laws. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required to qualify as a foreign corporation or file a
general consent to service of process in any such jurisdiction.
5. Antidilution Provisions. The Exercise Price and the number of
Warrant Shares issuable hereunder shall be subject to adjustment from time to
time as provided in this Section 5.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent.
(a) Subdivision or Combination of Common Stock. If the
Company, at any time after the Issue Date, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time after the Issue Date, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its
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shares of Common Stock into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.
(b) Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 5, the number of
shares of Common Stock issuable upon exercise of this Warrant and for which this
Warrant is or may become exercisable shall be adjusted by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable or for which this Warrant is or
may become exercisable (as applicable) upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(c) Consolidation, Merger or Sale. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company at any time after the Issue Date, then as a condition
of such consolidation, merger or sale or conveyance, adequate provision will be
made whereby the holder of this Warrant will have the right to acquire and
receive upon exercise of this Warrant in lieu of the shares of Common Stock
immediately theretofore acquirable upon the exercise of this Warrant, such
shares of stock, securities, cash or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In any such case,
the Company will make appropriate provision to insure that the provisions of
this Section 5 will thereafter be applicable as nearly as may be in relation to
any shares of stock or securities thereafter deliverable upon the exercise of
this Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Warrant and the obligations to deliver to the holder of this Warrant such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
(d) Distribution of Assets. In case the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, stock repurchase by
way of return of capital or otherwise (including any dividend or distribution to
the Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time after the Issue
Date, then the holder of this Warrant shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets (or rights) which would have been
payable to the holder had such holder been the holder of such shares of Common
Stock on the record date for the determination of shareholders entitled to such
Distribution.
(e) Notice of Adjustment. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which
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such calculation is based. Such calculation shall be certified by the chief
financial officer of the Company.
(f) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(g) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
(h) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable estimate thereof by the Company)
when the same shall take place. Such notice shall also specify the date on which
the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least seventy-five
(75) days prior to the record date or the date on which the Company's books are
closed in respect thereto. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.
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(i) Certain Events. If, at any time after the Issue Date, any
event occurs of the type contemplated by the adjustment provisions of this
Section 5 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 5(e) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(j) Certain Definitions.
(i) "Closing Bid Price" means, as of any date, (i) the
closing bid price for the shares of Common Stock as reported on the Nasdaq
SmallCap Market by Bloomberg Financial Markets or a comparable reporting service
of national reputation selected by the Company and reasonably acceptable to the
holder hereof if Bloomberg Financial Markets is not then reporting closing bid
prices for the Common Stock (collectively, "Bloomberg"), or (ii) if the Nasdaq
SmallCap Market is not the principal trading market for the shares of Common
Stock, the last reported sale price reported by Bloomberg on the principal
trading market for the Common Stock, or, if there is no sale price reported, the
last bid price reported by Bloomberg, or (iii) if the foregoing do not apply,
the last sale price of such security in the over-the-counter market on the pink
sheets or bulletin board for such security as reported by Bloomberg, or if no
sale price is so reported for such security, the last bid price of such security
as reported by Bloomberg, or (iv) if the Closing Bid Price cannot be calculated
as of such date on any of the foregoing bases, the Closing Bid Price of the
Common Stock on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by the Company and reasonably
acceptable to the holder, with the costs of the appraisal to be borne by the
Company. The manner of determining the Closing Bid Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made hereunder.
(ii) "Common Stock," for purposes of this Section 5,
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 5(c) hereof, the stock or other securities or
property provided for in such Section.
(iii) "Market Price" means, as of any date, the average of
the Closing Bid Prices for the Common Stock for the five (5) consecutive trading
days ending on the trading day immediately preceding such date of determination
(subject to equitable adjustment for any stock splits, stock dividends,
reclassifications or similar events occurring during such five (5) trading day
period).
6. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
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7. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
8. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 8(e) below; provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Sections 8(f) and (g) hereof. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary.
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Section 8(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 8, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 8. The Company
shall indemnify and reimburse the holder of this Warrant for all costs and
expenses (including legal fees) incurred by such holder in connection with the
enforcement of its rights hereunder.
(e) Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
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(f) Exercise or Transfer Without Registration. If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable transactions
and reasonably acceptable to counsel to the Company) to the effect that such
exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws (the cost
of which shall be borne by the Company if the Company's counsel renders such an
opinion and up to $250 of such cost shall be borne by the Company if the
holder's counsel is requested to render such opinion), (ii) that the holder or
transferee execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter, or status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act.
(g) Additional Restrictions on Exercise or Transfer.
Notwithstanding anything contained herein to the contrary, unless the holder
hereof delivers a waiver in accordance with the last sentence of this Section
8(g), this Warrant shall not be exercisable by a holder hereof to the extent
(but only to the extent) that (a) the number of shares of Common Stock
beneficially owned by such holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised portion of this Warrant or the unexercised or unconverted portion of
any other securities of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (b) the number of
shares of Common Stock issuable upon exercise of the Warrant (or portion
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by such holder and its affiliates of more
than 4.99% of the outstanding shares of Common Stock. To the extent the above
limitation applies, the determination of whether and to what extent this Warrant
shall be exercisable vis-a-vis other securities owned by such holder shall be in
the sole discretion of the holder and submission of this Warrant for full or
partial exercise shall be deemed to be the holder's determination of whether and
the extent to which this Warrant is exercisable, in each case subject to such
aggregate percentage limitation. No prior inability to exercise the Warrant
pursuant to this Section shall have any effect on the applicability of the
provisions of this Section with respect to any subsequent determination of
exerciseability. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (a) hereof. Except as provided in the immediately
succeeding sentence, the restrictions contained in this Section 8(g) may not be
amended without the consent of the holder of this Warrant and the holders of a
majority of the Company's then outstanding Common Stock. Notwithstanding the
foregoing, the holder hereof may waive the restrictions set forth in this
Section 8(g) by written notice to the Company upon not less than sixty-one (61)
days prior notice (with such waiver taking effect only upon the expiration of
such sixty-one (61) day notice period).
9. Registration Rights. The initial holder of this Warrant (and
assignees thereof) shall be entitled to have the resale of the Warrant Shares
issuable upon exercise of or otherwise pursuant
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to this Warrant registered under the Securities Act pursuant to the registration
statement (together with any amendments or supplements thereto) required to be
filed by the Company in accordance with that certain Registration Rights
Agreement, dated as of February 27, 1998, by and between the Company and the
other signatories thereto.
10. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Focus Enhancements, Inc.
142 North Road
Sudbury, MA 01776
Telecopy: (978) 371-8471
Attn: Chief Financial Officer
with a copy simultaneously transmitted by like means to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Telecopy: (617) 338-2880
Attn: John Piccione, Esq.
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 10.
11. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Warrant and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
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12. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
(b) Descriptive Headings. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) Cashless Exercise. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised at any time after the
first anniversary of the Issue Date until the end of the Exercise Period, by
presentation and surrender of this Warrant to the Company at its principal
executive offices with a written notice of the holder's intention to effect a
cashless exercise, including a calculation of the number of shares of Common
Stock to be issued upon such exercise in accordance with the terms hereof (a
"Cashless Exercise"). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for that number
of shares of Common Stock determined by multiplying the number of Warrant Shares
to which it would otherwise be entitled by a fraction, the numerator of which
shall be the difference between the then current Market Price of a share of the
Common Stock on the date of exercise and the Exercise Price, and the denominator
of which shall be the then current Market Price per share of Common Stock.
(d) Business Day. For purposes of this Warrant, the term
"business day" means any day, other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law, regulation or executive order to close.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
FOCUS ENHANCEMENTS, INC.
By: _________________________________
Name:_____________________________
Title:____________________________
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FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: FOCUS ENHANCEMENTS, INC.
142 North Road
Sudbury, MA 01776
Telecopy: (978) 371-8471
Attn: Chief Financial Officer
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of FOCUS ENHANCEMENTS, INC., a
corporation organized under the laws of the State of Delaware (the "Company"),
evidenced by the attached Warrant, and herewith makes payment of the Exercise
Price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144 is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
o The undersigned requests that the Company cause its transfer agent to
electronically transmit the Common Stock issuable pursuant to this
Exercise Agreement to the account of the undersigned or its nominee
(which is _________________) with DTC through its Deposit Withdrawal
Agent Commission System ("DTC Transfer").
o In lieu of receiving the shares of Common Stock issuable pursuant to
this Exercise Agreement by way of DTC Transfer, the undersigned hereby
requests that the Company cause its transfer agent to issue and deliver
to the undersigned physical certificates representing such shares of
Common Stock.
The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:
13
<PAGE>
Dated:_________________ _____________________________________
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
14
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
- ---------------- ------- ------------
, and hereby irrevocably constitutes and appoints
_____________________________________ as agent and attorney-in-fact to transfer
said Warrant on the books of the within-named corporation, with full power of
substitution in the premises.
Dated: _____________________, ____
In the presence of
- ------------------
Name: ____________________________
Signature: _______________________
Title of Signing Officer or Agent (if any):
------------------------
Address: ________________________
------------------------
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
SULLIVAN & WORCESTER LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
FAX NO. 617-338-2880
IN WASHINGTON, D.C. IN NEW YORK CITY
1025 CONNECTICUT AVENUE, N.W. 767 THIRD AVENUE
WASHINGTON, D.C. 20036 NEW YORK, NEW YORK 10017
(202) 775-8190 (212) 486-8200
FAX NO. 202-293-2275 FAX NO. 212-758-2151
April 2, 1998
FOCUS Enhancements, Inc.
142 North Road
Sudbury, Massachusetts 01776
Gentlemen:
We are familiar with the Registration Statement on Form S-3 (the "S-3
Registration Statement") to which this opinion is an exhibit, to be filed by
FOCUS Enhancements, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The S-3 Registration Statement relates to the proposed public offering by
certain securityholders of the Company of a total of 1,441,224 shares (the
"Shares") of the Company's Common Stock, $.01 par value per share ("Common
Stock"), consisting of: (i) 1,092,150 shares issued to JNC Opportunity Fund Ltd.
(the "Investor") in connection with a private placement in March 1998 (the
"March 98 Offering"); (iii) 327,645 shares issuable to the Investor upon the
exercise of warrants (the "Investor Warrants") issued to the Investor; and (iv)
21,429 shares issuable upon the exercise of warrants issued to the placement
agent and its designee (the "Broker Warrants" and, together with the Investor
Warrants, the "Warrants") in connection with the March 98 Offering.
We have acted as counsel to the Company in connection with the
preparation of the S-3 Registration Statement, and we have examined and relied
on the originals or copies, certified or otherwise identified to our
satisfaction of all such corporate records of the Company and such other
instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and we have made such
investigations of law, as we have deemed appropriate as a basis for the opinion
expressed below. In making such examination, we have assumed the genuineness of
all signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity to the originals of
<PAGE>
FOCUS Enhancements, Inc.
April 2, 1998
Page 2
all documents submitted to us as copies, which facts we have not independently
verified. As to various facts material to the opinions set forth herein, we have
relied without independent verification upon certificates of public officials
and upon facts certified to us by officers of the Company. We express no opinion
herein as to any laws other than the General Corporation Law of the State of
Delaware.
Based upon the foregoing, we are of the opinion that the Company has
corporate power adequate for the issuance of the Shares issuable in the manner
set forth in the S-3 Registration Statement and offered pursuant to the S-3
Registration Statement. The Shares issuable upon the exercise of the Warrants,
assuming conversion or exercise on the date hereof (the "Relevant Shares") have
been duly authorized and reserved for issuance. Upon the exercise of the
Warrants into Shares and delivery of such Shares in accordance with the terms of
the Warrants, the Relevant Shares so issued will be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
S-3 Registration Statement.
Very truly yours,
/s/ SULLIVAN & WORCESTER LLP
SULLIVAN & WORCESTER LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
FOCUS Enhancements, Inc. on Form S-3 of our report, dated February 27, 1998,
(except for Note 13 as to which the date is March 3, 1998), on the consolidated
financial statements of FOCUS Enhancements, Inc. as of and for the year ended
December 31, 1997, appearing in the Annual Report on Form 10-KSB of FOCUS
Enhancements, Inc. for the year ended December 31, 1997. We also consent to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
WOLF & COMPANY, P.C.
Boston, Massachusetts
April 2, 1998